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A  FINANCIAL 
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COMPLIMENTS  OF 

X  E.  Hi  ROLLINS  &  SONS 

BOSTON 

CHICAGO 

.  DENVER 

SAN  FRANCI8C0 

'  1  "V  •  V;  „>*?.*■ 


Digitized  by  the  Internet  Archive 
in  2017  with  funding  from 

University  of  Illinois  Urbana-Champaign  Alternates 


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\ 


A  FINANCIAL 
COURTSHIP 


OR  A  PLEA  FOR 
CONSE  RVATIVE 
INVESTMENTS 


BY 


Frank  W.  Rollins 


B  OSTON 

NATHAN  SAWYER  &  SON,  PRINTERS 
No.  41  Pearl  St.,  cor.  Franklin 
1906 


Copyright,  1808,  by 

E.  H.  Rollins  &  Sons, 


C0w\w\erce  avVyivaS  Sh  op» 


PREFACE. 


One  of  our  stenographers  said  to  me  one  day, 
“Why  don’t  you  get  up  a  book  or  pamphlet  which 
would  be  of  some  service  to  women  in  making 
investments?  Put  it  in  plain,  understandable  lan¬ 
guage,  avoiding  technical  terms.  You  have  no  idea 
how  ignorant  many  women  are  of  the  names  and 
very  rudiments  of  things.” 

I  knew  from  experience  that  she  was  right,  and 
I  have  tried  to  carry  out  the  idea.  In  a  life  insur¬ 
ance  circular  I  recently  saw  the  following  statement, 
which  I  do  not  vouch  for,  but  it  is  undoubtedly 
approximately  true  : 

“But  three  men  out  of  every  one  hundred 
acquire  a  competency  by  the  age  of  sixty-five,  and 
three  out  of  every  five  who  have  so  acquired  a 
competency  by  that  time  of  life  lose  it  between  the 
ages  of  seventy  and  seventy-five.  Nine  women  out 
of  every  ten  lose  their  money  if  it  is  not  placed  in 
trust.” 

This  statement  is  pretty  sweeping  and  would  be 
hard  to  prove,  but  if  only  approximately  true,  it 
gives  me  a  reason  for  offering  this  little  pamphlet. 


A •H-K' 


33£,,£> 

"K&53f 


A  FINANCIAL  COURTSHIP. 


CHAPTER  I. 

When  James  Allen  died,  he  left  his  two  daughters  a 
small  but  comfortable  home  and  fifty  thousand  dollars 
of  life  insurance.  He  had  been  a  quiet,  taciturn  man, 
taking  no  one,  not  even  his  own  daughters,  into  his 
confidence.  Not  until  he  was  buried  and  his  will  was 
read,  did  any  one  have  the  slightest  idea  of  his  posses¬ 
sions.  He  had  held  the  position  of  Clerk  of  the  United 
States  Circuit  Court  for  forty  years  and  had  lived  com¬ 
fortably,  educated  his  daughters  and  performed  his 
duty  as  a  good  citizen.  His  wife  had  died  four  years 
before  him.  It  now  appeared  that  he  had  adopted  early 
in  life  the  idea  of  living  close  to  his  income,  saving 
enough  each  year  to  pay  his  life  insurance  premiums, 
and  relying  on  the  insurance  to  take  care  of  his 
family  when  he  should  be  gone,  —  rather  a  dangerous, 
but  not  unusual,  policy. 

He  had  never  discussed  business  at  home,  and  his 
daughters  were  absolutely  ignorant  of  the  first  princi- 


6 


A  FINANCIAL  COURTSHIP. 


pies  of  finance.  They  had  received  the  usual  common 
school  education  and  were  now  well  advanced  toward 
middle  life,  Hannah  being  forty-two  and  Mary,  thirty- 
two. 

When  the  first  shock  of  the  unexpected  death  was 
overcome  and  they  found  themselves  thrown  wholly 
upon  their  own  resources  they  were  staggered  by  the 
weight  of  the  responsibility.  It  is  true  they  had  a 
comfortable  home  and  a  modest  fortune,  but  they  were 
entirely  without  male  kith  or  kin.  There  was  no  man, 
no  near  relative,  they  could  go  to  for  advice,  and,  with 
the  instinctive  dread  of  New  England  women  of  expos¬ 
ing  their  affairs  to  outsiders,  they  hesitated  to  take  any 
one  into  their  confidence. 

It  was  the  evening  following  the  funeral,  and  the  two 
sisters  in  their  new  black  gowns  were  seated  in  the 
little,  lonely  sitting-room,  reading  their  father’s  last 
will  and  testament,  which  was  very  brief,  and  left  all 
he  possessed  to  them  jointly. 

‘  ‘  I  never  had  the  slightest  idea  of  how  much  father 
had,”  said  Hannah,  staring  into  space. 

“Nor  I,”  said  Mary;  “we  always  had  enough,  but 
we  lived  very  economically,  so  I  suppose  we  can  go  on 
all  right.” 

“Yes,  but  you  must  remember  we  don’t  have  father’s 
salary  any  more.” 


A  FINANCIAL  COURTSHIP. 


7 


“  That’s  true;  I  never  thought  of  that.  Can  we  live 
on  what  he  left  ?  ”  And  an  anxious  look  came  over  the 
face  of  the  younger  woman. 

“We  must.  It  isn’t  as  though  we  were  young  and 
could  go  out  and  teach  or  become  stenographers.  We 
are  almost  too  old  to  begin  now,  and  it  doesn’t  look, 
Mary,  as  though  either  of  us  would  get  married.”  A 
sad  little  laugh  followed  the  words  and  the  quick  tears 
sprang  to  the  gentle  eyes  of  the  younger  sister.  The 
word  “  spinster”  was  indelibly  stamped  on  both  their 
good,  honest,  kindly  faces  and  they  knew  the  world 
would  pass  them  by  for  fresher  and  more  brilliant  ones. 
It  was  only  one  more  of  the  sad  little  home  tragedies  of 
hope  deferred  and  at  last  surrendered  and  merged  into 
gentle  resignation ;  a  loss  to  some  man  and  to  the  world, 
for  such  women  make  the  best  wives  and  mothers. 

“Well,  dear,  there  are  worse  things  than  being 
single,”  said  Mary. 

“I  suppose  so,  but  I  can’t  quite  see  what,  some¬ 
times,”  straining  the  long,  slender  fingers  together  in 
her  lap. 

‘  ‘  Why,  look  around  at  the  unhappy  homes  you 
know.” 

“Yes,  dear,  but  they  have  lived,  at  any  rate.  They 
know  or  knew  the  joys  as  well  as  the  sorrows  of  life, 
while  we  —  well,  we  are  two  old  maids  !  ” 


8 


A  FINANCIAL  COURTSHIP. 


“  Oh,  well,  we  can  have  some  fun,  too.  Let’s  cheer 
up  and  decide  what  we  are  going  to  do.  What’s  the 
next  move?”  said  the  younger  woman,  poking  the  fire 
vigorously  as  if  it  were  an  adversary. 

Hannah,  somewhat  ashamed  of  her  self-exposure, 
wiped  her  eyes  and  glanced  at  the  will  again.  44  One 
thing  we  don’t  have  to  worry  about, — we  have  a 
good  home  with  no  mortgage  on  it.  Father  had  a 
horror  of  mortgages.  I  heard  him  say  once  that 
a  man  with  a  mortgage  on  his  house  was  a  slave.” 

“  But  how  long  can  we  live  on  $50,000  ?  How  much 
shall  we  spend  a  year  ?  How  many  years  are  we  likely 
to  live  ?  What  shall  we  do  if  we  live  longer  than  the 
money  lasts?  ”  These  questions  rolled  out  in  a  torrent 
and  it  was  plain  that  the  younger  sister  had  more  to 
follow. 

4 ‘Wait,  wait,  Mary,  one  at  a  time.  I  don’t  know 
much  about  it,  but  I  suppose  it’s  like  this, — father  has 
left  us  this  $50,000  and  it’s  clear  that  he  thought  it 
was  enough  for  us  to  live  on  the  rest  of  our  lives.  He 
was  a  careful,  prudent  man,  and  that’s  the  idea  and 
intent  of  his  will  and  his  provision  for  us.  You  seem 
to  think  we  are  going  to  take  this  $50,000  and  bury  it 
in  the  cellar,  and  when  we  want  a  new  gown  just  go 
down  and  dig  out  a  ten  dollar  bill  and  buy  it,  and  so  on 
till  it  is  all  gone.” 


A  FINANCIAL  COURTSHIP. 


9 


4 6  Well,  I  must  confess  that  was  about  my  concep¬ 
tion  of  it,  dear.” 

“  We  must  live  on  the  income  of  it,”  said  Hannah 
proudly.  “  We  must  not  touch  the  principal.” 

“Yes,”  gasped  Mary,  “but  how  do  you  get  the 
income?  Who  pays  it  and  what  for?  What  is 
income,  anyway?” 

“We  ought  to  be  ashamed  to  be  so  ignorant,  but 
how  is  a  girl  who  never  handled  over  $25  at  one  time 
in  her  life,  and  who  never  even  heard  money  matters 
discussed  at  home,  to  know  anything  about  it?  Why, 
the  income,  I  suppose,  is  what  you  get  from  your 
investments.” 

“But  how  do  you  make  investments?  Where  do 
you  go? ” 

“I  don’t  know.  Some  bank,  I  suppose.  Oh,  I 
know,  the  magazines  are  full  of  things.  Don’t  you 
remember?  You’ve  seen  them  hundreds  of  times.  I 
always  read  them,  they  look  so  attractive.  Let’s  see,” 
reaching  for  one  of  the  popular  magazines  and  hur¬ 
riedly  turning  the  multitudinous  pages  of  advertising 
matter  at  the  back. 

“  Here’s  one  ;  just  listen  :  6 100  per  cent,  profit ;  send 
us  $100  and  in  six  months  we  guarantee  to  return  you 
your  money  and  $100  additional.’  Just  think  of  that ! 
Why,  we  could  put  in  the  whole  $50,000  and  double 
our  money.” 


10 


A  FINANCIAL  COURTSHIP. 


“  My  !  that  would  be  fine ;  but  do  you  suppose  it  is 
true  ?  Is  it  safe  ?  ” 

“They  guarantee  it.” 

4  4  But  who  are  6  they  ’  ?  ” 

“Here’s  another:  ‘Banking  by  mail,  6  per  cent, 
compounded  annually.  Sums  of  any  size  received. 

The  Union  Trust  Company  of  L - .’  That  sounds 

more  reasonable.  Don’t  you  think  100  per  cent, 
seems  pretty  large?  Here’s  another:  4  The  K.  T.  Oil 
Company  —  300  per  cent,  profits  ;  no  risk ;  stock  in 
$10  shares.  Send  for  prospectus.’” 

“Well,  it  seems  easy  enough  to  invest,  doesn’t  it? 
Such  a  magazine  wouldn’t  publish  those  advertisements 
unless  the  people  were  honest,  would  it?” 

“I  don’t  know,”  said  Hannah  despondently;  “we 
are  always  reading  in  the  papers  about  the  failures  of 
companies  and  about  bunco  schemes.  How  is  one  to 
know?  Oh,  I  wish  we  had  a  brother  or  an  uncle  or  a 
man  of  some  kind.  It’s  pretty  hard  for  two  lone 
women  with  absolutely  no  knowledge  to  do  the  right 
thing.  And  just  suppose  we  should  do  the  wrong 
thing  and  lose  part  or  all  of  our  money.  Do  you 
realize  what  that  might  mean?  Did  you  ever  see  a 
poor-farm,  Mary?  Did  you  ever  go  into  one?  Did 
you  ever  inhale  the  pauper  smell?  Oh,  it  makes  me 
sick  to  think  of  it.” 


A  FINANCIAL  COURTSHIP. 


11 


“We  mustn’t  make  the  mistake,  then,  dear;  we 
must  go  to  some  one  who  does  know,  some  one  we  can 
trust.  We  must  study  these  things  and  know  some¬ 
thing  about  them.  Come,”  said  the  younger  girl 
bravely,  “we  will  put  a  good  face  on  this.  We  have 
the  average  amount  of  brains  and  we  can  learn  what  is 
right.  Don’t  give  way,”  getting  up  and  putting  her 
arm  around  her  sister  protectingly. 

‘  ‘  But  to  whom  can  we  go  ?  ” 

“  Well,  there’s  Mr.  Asquith  at  the  bank.” 

“  Oh,  you  know  what  a  mean,  secretive  old  man  he 
is  ;  I  wouldn’t  trust  him.” 

“Mr.  Appleton,  the  president  of  the  street  rail¬ 
way.” 

“  He’s  too  rich  and  grand  to  bother  with  our  affairs.” 

*  ‘  I  know  —  Mr.  Stanley,  that  new  lawyer  who 
came  here  from  Boston  for  his  health  last  year. 
They  said  he  was  in  the  banking  business  once.” 

“Would  you  dare  to  go  to  him,  dear?  He  seems 
to  be  a  splendid  man.  I  like  his  eyes  and  his  good, 
aquiline  nose  and  his  square  jaw.  He  looks  truthful. 
But  why  should  he  bother  about  our  poor  affairs  ?  ” 

“  I  think  he  would  take  an  interest,”  replied  Mary, 
getting  behind  her  sister  to  hide  a  telltale  blush. 
“  You  know  I  met  him  at  Mrs.  Coleman’s  tea  and  have 
seen  him  once  or  twice  at  the  Golf  Club  since.” 


12 


A  FINANCIAL  COURTSHIP. 


‘  ‘  Have  you  ?  I  didn’t  know  you  had  met  him ;  you 
never  mentioned  it  to  me.” 

‘  ‘  I  forgot,  dear.  Shall  we  go  to  see  him  to¬ 
morrow?  ” 

“  If  you  think  he  would  advise  us.  I  can’t  think  of 
any  one  else  and  he  does  look  honest.” 

The  next  afternoon  the  two  sisters  timidly  entered 
the  office  of  Mr.  Edward  A.  Stanley  and  were  pleas¬ 
antly  received  by  that  gentleman.  Mr.  Stanley,  while 
educated  for  the  bar,  had  spent  most  of  his  life  in  the 
banking  business ;  but,  having  made  a  modest  fortune 
and  finding  that  his  nerves  were  giving  way,  he  gave 

up  his  business  in  Boston  and  moved  to  S - , 

where  he  played  at  practicing  law,  but  really  spent 
most  of  his  time  on  the  golf  links.  These  two  women 
had,  with  feminine  instinct,  made  a  correct  estimate  of 
his  character.  He  was  distinctly  honest.  He  was  also 
a  man  of  wide  knowledge,  broad  experience  and  excel¬ 
lent  judgment.  It  was  very  fortunate  for  them  that 
they  fell  into  such  good  hands.  He  was  old  enough 
to  have  had  experience,  yet  not  so  old  as  to  have  lost 
the  vigor  and  virility  of  youth. 

It  did  not  take  them  long  to  state  their  case,  the 
talking  being  done  by  the  elder  sister,  Mary  remaining 
strangely  silent  and  distrait  but  very  attentive.  It 


A  FINANCIAL  COURTSHIP. 


13 


was,  of  course,  a  very  simple  matter,  but  Stanley  saw 
at  once  that  what  they  wanted  was  not  simply  to  be 
told  what  to  put  their  money  into  but  that  they  needed 
instruction.  They  were  as  ignorant  of  finance  as  a 
toad  is  of  skating,  so  he  said : 

“I  am  going  to  speak  very  plainly  to  you,  and  do 
what  I  would  do  for  my  own  sisters,  if  I  had  any.” 

4 ‘Oh,  will  you?  That’s  just  what  we  want!” 
exclaimed  Hannah. 

‘  ‘  I  could  very  easily  invest  your  money  for  you  at 
reasonable  rates  of  interest,  and  safely,  but,  left  alone 
as  you  are,  you  ought  to  know  something  about  finan¬ 
cial  matters.  You  ought  not  to  be  left  to  the  mercy 
of  every  ‘  get-rich-quick  ’  advertisement,  every  chance 
promoter  who  comes  along  with  a  tongue  as  smooth  as 
an  axle  newly  oiled.  You  ought  to  know  at  least  the 
rudiments  of  finance ;  you  ought  to  have  the  weapons 
of  defence  and  know  how  to  use  them.  Now,  I’ll  tell 
you  what  I  will  do.  I’m  not  a  very  busy  man.  I  have 
just  enough  to  do  in  taking  care  of  my  own  property 
and  my  small  practice  to  keep  me  from  going  to  seed 
mentally,  while  I  devote  the  most  of  my  time  to  golf 
and  other  important  matters.  I  will  undertake  to 
teach  you  what  you  ought  to  know.  I  will  put  my 
time  against  the  enjoyment  of  your  society  and  there 
will  be  no  charge.  Let  us  start  fairly  and  understand 


14 


A  FINANCIAL  COURTSHIP. 


each  other.  I  know  you  and  your  kind  well  enough 
to  understand  you  would  accept  no  gratuity  at  my 
hands,  but  I  am  thoroughly  in  earnest  when  I  say  I 
shall  enjoy  doing  it,  and  that  it  will  not  interfere  with 
any  of  my  work  or  plans.”  He  spoke  earnestly  to 
Hannah,  but  out  of  the  corner  of  his  eye  glanced  at 
Mary.  Again,  that  blush. 

For  the  first  time  the  younger  sister  spoke:  “ I 
don’t  see,  Mr.  Stanley,  how  we  could  allow  you  to  do 
it  for  nothing.” 

“Oh,  but,  Mary,”  broke  in  Hannah,  “he  says  he 
will  enjoy  it.  I  am  sure  it  is  most  kind,  Mr.  Stanley, 
and  we  shall  be  only  too  glad  to  accept.” 

“All  right,”  exclaimed  Stanley,  looking  rather 
triumphantly  at  the  demure  face  on  his  right.  “  When 
shall  we  begin?  We  must  go  at  it  methodically  and 
begin  at  the  beginning.  Let  me  think,”  looking  down 
at  his  desk  for  several  moments,  evidently  turning 
something  over  in  his  mind.  “You  won’t  want  to 
come  to  my  office  every  day ;  suppose  I  call  at  the 
house  evenings  and  we  have  lessons  there  ?  ” 

Now  both  sisters  blushed  and  it  was  Hannah’s  turn 
to  be  embarrassed. 

“  Why,  of  course,  if  you  don’t  think”  — 

“All  right.  That’s  settled,”  exclaimed  Stanley, 
without  giving  her  time  to  voice  her  fears.  He  knew 


A  FINANCIAL  COURTSHIP. 


15 


what  was  passing  through  her  mind  and  how  she  was 
saying  to  herself,  ‘ 4  What  will  the  neighbors  say  ?  ”  and 
so  forth. 

“  I’ll  call  to-morrow  at  eight.” 

A  cheerful  fire  welcomed  Mr.  Stanley  the  next 
evening  and  it  was  difficult  to  determine  whether  it 
was  the  warmth  from  the  hearth  or  something  else  that 
made  the  cheeks  of  the  sisters  glow.  They  looked 
almost  pretty  as  they  received  their  guest.  At  first 
they  were  a  little  embarrassed,  but  he  soon  put  them 
at  their  ease  by  taking  up  the  subject  in  a  plain,  matter- 
of-fact  way. 

‘  ‘  I’m  going  to  assume  that  you  are  absolutely 
ignorant  on  the  subject  of  finance  and  investments, 
although,  of  course,  much  that  I  tell  you  will  be  an 
old  story ;  and  that  reminds  me  of  an  incident  in  my 
business. 

“We  received  a  letter  one  day  from  a  woman  living 
in  an  interior  country  town,  asking  for  a  circular 
describing  a  certain  bond  on  a  western  city.  Thinking 
that  the  woman  wished  to  make  a  purchase  we  imme¬ 
diately  started  one  of  our  salesmen  off  to  see  her.  It 
was  necessary  for  him  to  travel  some  hours  on  the 
cars  and  then  drive  about  five  miles  into  the  country. 
On  arriving  at  the  house  he  found  the  woman  hanging 


16 


A  FINANCIAL  COURTSHIP. 


out  clothes.  He  stated  to  her  he  came  from  our  house, 
and  that  we  had  received  a  letter  inquiring  about  a  cer¬ 
tain  bond,  and  that  he  was  there  to  tell  her  about  it. 
She  replied :  6  Oh  !  I  did  not  want  to  buy  any  bond, 
but  I  used  to  live  in  that  town,  and  I  thought  I  would 
like  to  see  your  circular  to  see  whether  the  town  had 
improved  any.’ 

66  Not  knowing  what  you  do  know,  I  will  begin  at  the 
beginning  and  you  can  absorb  as  much  as  you  need. 
Here  are  some  blank  books  and  pencils,  and  I  wish  you 
would  make  notes  as  I  go  along,  for  I  shall  examine 
you  very  severely.  You  know  this  is  a  real  school,” 
he  added,  with  a  quaint,  winsome  smile. 

“  MONEY. 

4  6  In  order  to  invest,  you  must  have  money.  Money 
is  a  commodity  which  represents  value  or  has  value 
itself.  Theoretically,  you  can’t  get  money  without 
giving  an  equivalent  for  it,  either  in  labor,  land, 
merchandise,  or  something  of  recognized  value.  The 
money  you  have  inherited  was  earned  by  your  father 
by  a  lifetime  of  labor.  Now  money,  like  human 
beings,  must  work  to  get  the  best  out  of  itself.  If 
you  bury  your  money  in  the  ground,  you  get  nothing 
out  of  it  beyond  the  miser’s  feeling  of  possession. 
Therefore,  as  soon  as  one  accumulates  any  surplus 


A  FINANCIAL  COURTSHIP. 


17 


beyond  what  he  needs  to  feed  and  clothe  himself,  he 
tries  to  set  it  at  work  for  him  and  that,  of  course,  is 
the  secret  of  all  wealth,  the  magic  but  simple  process 
by  which  nearly  all  the  great  fortunes  have  been  cre¬ 
ated  ;  not  only  does  the  man  work  to  earn  more  money, 
but  the  surplus  of  his  previous  earnings  toils  for  him, 
resting  neither  day  nor  night,  for  interest  goes  on  days 
and  nights,  Sundays  and  holidays,  three  hundred  and 
sixty-five  and  one-quarter  days  in  the  year.  There  is 
no  seventh  day  of  rest  for  interest,  no  Fourth  of  July, 
no  Labor  Day  ;  it  toils  and  moils  eternally. 

“  ‘But  what  is  interest?’  you  may  ask.  It  is  the 
wages  of  your  money,  if  you  look  upon  it  as  a  laborer. 
It  is  what  some  person  is  willing  to  pay  you  for  the 
use  of  it.  We  will  imagine  a  man  has  discovered 
some  new  way  of  making  cotton  cloth.  He  has  a 
valuable  idea,  but  no  money.  He  hears  that  you  have 
$50,000.  He  comes  to  you  and  says  :  ‘  If  I  had  your 
$50,000  I  could  put  up  a  small  mill  and  make  cloth  in 
my  new  way,  and  I  could  make  $25,000  a  year  over 
and  above  all  expenses.  If  you  will  let  me  have  your 
$50,000  I  will  pay  you  6  per  cent,  a  year  for  it,  and 
in  a  few  years  I  shall  have  earned  enough  to  pay  you 
back  the  $50,000.’  Now  you  can  figure  that  out 
easily :  6  per  cent,  on  $50,000  is  $3,000 ;  deducting 
$3,000,  which  he  would  pay  you  annually  for  interest, 


18 


A  FINANCIAL  COURTSHIP. 


or  for  the  use  of  your  money,  would  leave  him 
$22,000,  net  annual  profit,  which  he  could  put  away 
to  repay  your  principal ;  or  he  could,  in  turn,  set 
that  amount  to  work  again  by  enlarging  his  mill 
or  investing  it.  Have  I  made  it  clear  to  you  what 
interest  is?” 

“Yes,  I  see  that  clearly,”  answered  Hannah,  who 
had  made  an  occasional  note,  while  Mary  had  simply 
glanced  at  the  speaker’s  face  shyly  once  in  a  while f 
saying  nothing. 

“We  have  seen  what  money  is,”  he  went  on,  “  and 
that  to  get  the  best  out  of  it  we  must  make  it  work 
for  us.  That  is  all  very  simple  and  elementary  and 
something  that  everybody  probably  knows ;  but  right 
here  the  real  trouble  begins.  What  kind  of  work 
shall  our  money  do  for  us?  How  shall  this  useful 
servant  be  employed?  What  can  it  be  trusted  to  do 
safely?  Whom  can  we  trust  to  employ  it?  These 
are  questions  as  old  as  the  world  and  as  fresh  as  the 
newly  risen  sun.  As  soon  as  one  has  earned  a  dollar 
of  surplus  these  questions  begin  to  arise  and  they  last 
as  long  as  there  is  a  4  shot  in  the  locker.’  Some  learn 
what  to  do  by  long,  sad  and  costly  experience,  some 
are  taught  by  prudent  advisers,  some  know  by  intui¬ 
tion,  but  the  great  mass  never  learn  at  all,  and  the 
world  is  full  of  human  ghouls  who  live  by  preying  on 


A  FINANCIAL  COURTSHIP. 


19 


the  ignorance  of  the  great  mass  who  never  learn.  All 
these  advertisements  which  you  see  so  attractively  dis¬ 
played  in  the  papers  and  magazines,  promising  10,  20, 
30  or  100  per  cent,  profit,  are  the  webs  spread  to  catch 
the  gullible  human  fly.  Doubtless  you  have  already 
been  reading  them  and  have  thought  of  doubling  your 
money  in  a  year.  Isn’t  it  so  ?  ” 

The  sisters  smiled  guiltily  and  assented. 

“I  thought  so.  Hence  these  lessons.  To  the 
financier  it  is  simply  incomprehensible  that  people 
should  be  drawn  into  such  transparent  swindles,  but 
he  forgets  that  finance  is  his  trade,  that  he  knows  it 
root  and  branch,  while  to  the  average  man,  and  espe¬ 
cially  to  the  average  woman,  it  is  a  sealed  book,  as 
incomprehensible  as  the  mechanism  of  a  fine  watch  to 
a  five-year-old  child.” 

“But,  Mr.  Stanley,”  said  Mary,  “would  a  high- 
class  magazine  publish  fraudulent  things  of  that  kind  ?  ” 

“  Some  of  them  do.  There  are  very  few  which  dis¬ 
criminate.  Most  of  the  newspapers  and  magazines 
will  publish  any  advertisement  not  prohibited  by  law. 
The  cheaper  magazines,  which  have  an  enormous  circu¬ 
lation,  claim  that  they  refuse  many  advertisements 
promising  impossible  dividends,  but  the  daily  papers 
all  over  the  country  take  about  everything,  exercising 
care  only  to  herd  the  legitimate  banking  houses 


20 


A  FINANCIAL  COURTSHIP. 


together  and  apart  from  the  illegitimate,  leaving  the 
latter  in  a  limbo  by  themselves.  If  you  were  to 
remonstrate  with  the  papers  and  magazines  for  taking 
such  advertisements,  they  would  tell  you  that  they  do 
not  have  time  to  examine  into  the  merits  of  every 
scheme  which  is  brought  to  them,  and  that  they  are 
not  in  business  for  their  health.” 

“Some  of  these  attractive  advertisements  are  by 
banks,”  exclaimed  Hannah.  “  Surely  a  bank  ought  to 
be  honest  and  safe.” 

“  Yes,  and  that  is  why  so  many  people  are  misled. 
That  word  4  bank 9  is  worked  to  death  and  made  to 
cover  all  sorts  of  things.  There  are  banks  and  banks. 
Any  one  can  hang  out  a  sign  —  bank  —  but  it  is  not 
necessarily  a  legitimate  bank,  what  you  would  under¬ 
stand  as  a  bank.  Ignorant  people,  and  our  newly 
arrived  immigrants,  especially,  are  misled  by  this  use 
of  the  word  bank.  Such  people  have  no  way  of  dis¬ 
criminating  ;  to  them  a  bank  is  a  bank,  and  I  suppose 
they  think  they  are  all  under  government  control,  as 
they  are  in  some  foreign  countries.  In  running 
through  the  popular  magazines  I  find  many  banks 
advertising  high  rates  of  interest.  Such  institutions 
should  be  carefully  avoided.  Sound  and  honestly 
managed  banking  institutions  do  not  need  to  advertise 
high  rates,  in  fact,  do  not  pay  high  rates ;  and  the  ones 


A  FINANCIAL  COURTSHIP. 


21 


which  appear  in  the  advertising  columns  are  probably 
organized  for  the  benefit  of  the  promoters  and  not  for 
the  depositors.  You  may  scan  the  papers  in  vain  for  an 
advertisement  of  our  old  and  well-established  savings 
banks.  There  are  some  good  trust  companies  that 
advertise,  but  they  do  not  offer  fancy  rates  of  interest. 

66 1  am  not  surprised  that  very  intelligent  people  are 
frequently  caught  by  these  advertisements.  They  are 
shrewdly  and  speciously  drawn  and  are  most  seductive 
to  people  with  small  incomes.  Many  people  are  drawn 
into  these  schemes  because  they  are  ashamed  to  go  to 
some  man  who  is  posted  in  such  matters  and  ask  about 
their  real  standing.  In  their  hearts  they  know  that 
there  is  something  questionable,  and  they  hesitate  to 
expose  their  credulity.  I  have  in  my  hand  the  adver¬ 
tisement  of  a  company  which  states  that  it  pays  5  per 
cent.,  and  one  of  the  attractive  features  which  it  holds 
out  is  that  you  can  withdraw  your  money  at  any  time. 
Now  any  financier  will  tell  you  that  it  is  impossible  for 
a  bank  to  safely  invest  money  and  agree  to  pay  5  per 
cent,  upon  it,  and,  at  the  same  time,  allow  the 
depositor  to  withdraw  without  notice.  The  very 
strongest  trust  companies  only  allow  2  to  3  per  cert, 
on  such  deposits. 

46  Another  advertisement  which  I  have  here  offers 
a  6  per  cent,  bond  upon  real  estate.  Such  an  adver- 


22 


A  FINANCIAL  COURTSHIP. 


tisement  should  put  one  upon  his  inquiry,  for  the 
reason  that  you  can  get  all  the  money  you  want  in 
nearly  every  well-populated  section  of  this  country  at 
5  per  cent.,  and  in  many  sections  of  the  country  at 
even  lower  rates.  You  must  remember  that  if  these 
companies  advertise  to  pay  6  per  cent.,  they  must  be 
earning  a  great  deal  more  than  6  per  cent.,  in  order  to 
pay  their  expenses  and  make  a  profit  for  themselves. 
Therefore,  they  must  be  charging  the  borrower  over 
7  per  cent,  for  the  use  of  the  money.  This  clearly 
indicates  a  dangerous  and  speculative  investment. 

“  I  do  not  wish  to  give  the  impression  that  because 
a  bank  or  a  company  advertises  it  is  necessarily 
unsound ;  I  merely  wish  to  state  that  very  few  good 
banks  do  advertise,  and  that  the  ones  which  advertise 
high  rates  are  the  ones  to  be  carefully  examined  before 
a  deposit  is  made  with  them.” 

“  I  have  been  very  much  attracted,”  said  Mary,  “  by 
the  advertisements  of  the  wireless  telegraph.  I  don’t 
see  why  that  shouldn’t  prove  a  great  invention  and  be 
very  profitable.” 

“So  it  may,”  said  Mr.  Stanley;  “but  it  is  yet 
largely  in  the  experimental  stage.  It  has  not  been 
reduced  to  a  business  basis.  The  original  promoters 
of  great  enterprises  and  the  first  stockholders  rarely 
make  money.  Once  in  a  great  while  they  are  enor- 


A  FINANCIAL  COURTSHIP. 


23 


mously  successful,  as  in  the  case  of  the  telephone,  but, 
as  a  rule,  two  or  three  sets  of  stockholders  have  to  be 
wiped  out  before  a  great  invention  is  placed  upon  a 
sound  commercial  basis.  I  should  say  that  the  stock 
of  new  inventions  or  industrial  enterprises  would  not 
be  classed  as  a  safe  investment  for  women.  I  am  free 
to  admit  that  the  wireless  telegraph  is  fascinating  and 
attractive.  There  is  a  certain  romantic  interest  in 
having  your  money  in  such  a  weird  and  uncanny  thing 
as  the  wireless. 

“ 1  am  very  anxious  that  you  should  not  misunder¬ 
stand  my  general  remarks  on  advertising.  I  am  only 
trying  to  lay  down  some  general  principles  for  your 
guidance.  I  do  not  wish  you  to  think  that  the  mere 
fact  that  a  bank  or  trust  company  or  a  corporation 
advertises  lays  it  open  to  suspicion,  for  I  am  a  great 
believer  in  advertising,  and  the  papers  contain  many 
perfectly  legitimate  advertisements.  Nearly  every 
reputable  bond  house  in  the  country  advertises  its 
bonds.  They  do  not,  however,  offer  6,  7,  8  and  10 
per  cent,  returns  on  the  money.  The  thing  to  look 
out  for  is  the  company  or  bank  advertising  excessive 
and  improbable  rates.  A  bank  which  offers  4  per 
cent,  interest  is  well  within  the  lines  of  safety ;  but 
one  which  offers  5  per  cent,  and  over  should  be  inves¬ 
tigated.  A  little  practice  will  enable  you  to  differen- 


24 


A  FINANCIAL  COURTSHIP. 


tiate  very  readily  between  a  sound  and  an  unsound 
company.  Any  financier  could  go  through  a  news¬ 
paper  or  a  magazine  and  blue  pencil  the  unsound  adver¬ 
tisements  as  fast  as  he  could  run  his  eye  over  them.” 

46 1  know  a  man  who  made  $100,000  in  one  month 
in  mining  stocks,”  said  Hannah,  somewhat  irrelevantly. 

“Yes,  there  are  many  such  instances,  and  I  have 
heard  of  men  making  money  at  Monte  Carlo  and  on 
horse  racing;  but  that  is  not  investment  —  that  is 
gambling,  and  it  is  not  a  proper  business  for  women. 
Mining,  as  mining,  is  a  perfectly  legitimate  business* 
and,  properly  conducted  by  a  man  who  understands  it, 
is  sometimes  very  profitable.  The  same  may  be  said 
of  the  oil  business,  but  women  situated  as  you  are 
cannot  possibly  know  anything  about  mining  or  the  oil 
business  or  have  any  means  of  investigating  it.  Such 
stocks  are  so  speculative,  so  dangerous,  so  uncertain, 
that  no  man  who  is  square  and  honest  would  think  for 
a  moment  of  investing  trust  funds  in  them.  A  really 
first  grade  mine,  or  oil  well,  is  seized  by  men  on  the 
spot,  and  does  not  have  to  advertise  to  find  a  pur¬ 
chaser.  The  country  is  full  of  shrewd  men  with  an 
abundance  of  money,  perfectly  familiar  with  mining 
and  kindred  ventures,  who  are  ready  to  take  up  every 
good  mine  or  oil  well  that  appears.  I  am  not  prepared 
to  say  that  good  mines  and  good  wells  are  not  some- 


A  FINANCIAL  COURTSHIP. 


25 


times  sold  by  advertisement,  but  it  is  a  rare  occur¬ 
rence.  There  is  but  one  road  for  the  trustee  who 
handles  the  funds  of  women  and  children,  and  that  is 
the  road  of  absolute  safety.  Mines  and  oil  wells  do 
not  lie  along  that  road. 

‘‘There  is  one  thing  that  many  newspapers  and 
some  magazines  do,  which  it  seems  to  me  is  very  rep¬ 
rehensible  and  very  dangerous,  and  of  course  exceed¬ 
ingly  misleading,  and  that  is  the  publication  as  reading 
matter  of  paid  advertisements.  It  is  utterly  impos¬ 
sible  for  those  who  are  not  familiar  with  newspapers  to 
recognize  the  difference  between  this  reading  matter, 
which  is  a  paid-for  advertisement,  and  bona  fide  news 
matter.  In  fact,  the  whole  intent  of  it  is  to  deceive. 
The  practiced  advertiser  or  newspaper  man  can  detect 
this  kind  of  an  advertisement,  but  a  woman  never 
would  know  the  difference,  and  she  would  get  the 
impression  that  what  she  was  reading  was  the  opinion 
of  the  paper  itself  or  of  its  correspondent.  This  is  a 
matter  which  ought  to  be  regulated  by  law  in  some 
way.  No  reputable  newspaper  or  magazine  ought  to 
countenance  such  advertising. 

‘  ‘  Most  of  the  big  metropolitan  newspapers  indicate 
paid  reading  notices  by  stars  or  by  the  word  ‘  adv.’  at 
the  end  of  the  article  paid  for.  But,  outside  of  these 
big  metropolitan  papers,  most  journals  have  a  price 


26 


A  FINANCIAL  COURTSHIP. 


for  pure  reading  matter,  which  they  do  not  distinguish 
in  any  way,  and,  even  when  the  three  stars  or  the 
word  6  adv.’  is  used,  the  ordinary  reader  does  not  at 
once  understand  the  meaning  of  these  printer’s  marks.” 

For  an  hour  more  the  two  sisters  plied  him  with 
questions,  which  he  answered  clearly  and  simply ;  and 
then  he  took  his  departure,  promising  to  come  again 
the  next  Tuesday  evening.  After  he  had  gone,  it 
took  two  hours  more  for  those  he  left  behind  to  get 
sufficiently  calmed  down  and  talked  out  to  go  to  bed. 
They  decided  that  it  had  been  a  very  instructive  and 
delightful  visit. 


A  FINANCIAL  COURTSHIP. 


27 


CHAPTER  n. 

On  the  following  Tuesday  Stanley  arrived  promptly, 
bringing  with  him  a  bouquet  of  handsome  American 
Beauties.  After  a  brief  review  of  what  he  had  gone 
over  before,  in  order  to  see  that  they  had  it  clearly 
in  mind,  he  said  : 

“  I  am  going  to  take  up  with  you  this  evening  the 
possibilities  in  the  way  of  good  investments.  We  will 
go  through  the  entire  list  first,  and  then  look  them 
over  in  detail.  Here  they  are  : 

“You  may  invest  your  money  in  government  bonds. 

“  You  may  invest  it  in  land  or  real  estate  ;  and  by 
real  estate  I  include  houses,  blocks,  etc. 

“You  may  invest  it  in  mortgages  on  real  estate. 

“  You  may  invest  it  in  municipal  bonds. 

“You  may  invest  it  in  railway  bonds. 

“You  may  invest  it  in  public  service  corporation 
bonds. 

“You  may  invest  it  in  stocks. 

“  You  may  invest  it  in  bank  stocks. 

“  This  covers  pretty  well  the  list  of  possible  invest¬ 
ments.  Now,  to  describe  more  clearly  these  various 


28 


A  FINANCIAL  COURTSHIP. 


forms  of  investments  I  must  at  the  start  make  clear 
to  you  the  meaning  of  the  names  of  those  different 
things. 


“WHAT  IS  A  MORTGAGE? 

“If  you  owned  a  piece  of  land  or  a  house,  —  say 
this  house  we  are  in,  —  and  you  needed  a  sum  of  money, 
you  could  go  to  a  savings  bank  and  they  would  lend 
you  a  certain  sum  upon  it,  —  taking  what  is  called  a 
mortgage  upon  the  house  and  lot,  to  secure  themselves 
against  loss.  The  way  they  would  go  about  it  is  as 
follows : 

6  ‘  They  would  first  visit  the  property  and  make  up 
their  minds  what  it  is  worth,  or  what  it  would  bring  if 
they  had  to  sell  it  to  get  their  money  back.  Let  us 
say  that  they  valued  it  at  $5,000.  They  would  prob¬ 
ably  tell  you  that  they  would  loan  you  60  per  cent, 
of  its  value,  or  $3,000.  You  see  they  keep  well 
within  the  lines  of  safety,  and  leave  a  good  margin  of 
40  per  cent,  of  the  supposed  value  to  take  care  of  any 
possible  shrinkage  or  change  in  values.  Having  agreed 
on  the  sum,  they  would  draw  up  a  note,  or  promise  to 
pay,  at  a  certain  stated  time  (one,  two  or  five  years, 
according  to  your  wishes),  providing  in  the  note  that 
you  should  pay  the  bank  every  six  months  a  stated 
sum  as  interest. 


A  FINANCIAL  COURTSHIP. 


29 


6  6  Then  they  would  draw  up  a  formidable  legal  docu¬ 
ment  known  as  a  mortgage,  by  which  you  really  trans¬ 
fer  your  property  to  the  bank,  for  when  you  have  once 
signed  it,  you  can’t  sell  your  property,  nor  give  it 
away,  except  subject  to  the  mortgage.  Now  what 
happens?  The  bank  hands  over  to  you  $3,000  in 
money,  or  a  check  for  it.  Time  goes  on  and  every 
six  months  you  must  go  to  the  bank  and  pay  them  $75 
(I  am  supposing  the  rate  of  interest  to  have  been 
agreed  upon  as  5  per  cent.),  which  is  what  the  bank 
gets  for  the  use  of  its  money.  At  the  end  of  five 
years,  or  for  whatever  time  the  money  was  loaned  to 
you,  you  must  go  to  the  bank  and  pay  them  back  the 
$3,000.  When  you  do  this  the  bank  will  execute 
what  is  known  as  a  release  of  the  mortgage  (in  other 
words,  cancel  it),  and  hand  it  back  to  you,  together 
with  your  note  duly  canceled.  The  bank  has  its 
money  back  and  you  have  your  house  free  and  clear  of 
all  encumbrance.  During  this  period,  however,  you 
will  have  paid  the  bank  the  sum  of  $750  for  the  use  of 
the  money.  The  dictionary  describes  a  mortgage  as 
‘  a  grant  (of  land,  houses  or  other  immovable 
property)  as  security  for  money  lent  or  contracted  to 
be  paid,  or  other  obligation,  on  condition  that  if  the 
obligation  be  discharged  according  to  the  contract,  the 
grant  shall  be  void,  otherwise  it  shall  remain  in  full 


30 


A  FINANCIAL  COURTSHIP. 


force,’  but  I  have  tried  to  make  it  clearer  by  an  object 
lesson.” 

44  But  what  is  to  prevent  one  from  going  to  another 
bank  and  getting  another  mortgage  and  more  money?” 
asked  Mary. 

4  4 1  should  have  explained  that  when  the  bank  made 
the  mortgage,  they  at  once  took  it  to  the  county 
recorder’s  office  and  had  it  recorded ;  and  this  effec¬ 
tually  prevents  another  first  mortgage  on  the  same 
property. 

44  WHAT  IS  A  BOND? 

44  A  bond  is  a  promise  to  pay.  It  may  be  issued  by 
a  town,  city,  county,  state  or  the  government,  in 
which  case  the  faith  and  credit  of  the  municipality* 
state  or  government  is  pledged  for  the  payment ;  or 
it  may  be  issued  by  a  corporation,  like  a  railroad, 
an  electric  light  company  or  a  mill,  in  which  case 
it  is  generally  secured  by  a  mortgage,  but  not  neces¬ 
sarily  so,  for  there  are  debenture  bonds  which  fre¬ 
quently  have  no  specific  security  behind  them  on  which 
you  can  levy.  It  is  usually  a  promise  to  pay  a  sum 
of  money  (say  $1,000)  at  a  certain  stated  time,  with 
an  agreement  to  pay  the  interest  every  six  months. 
For  convenience  there  are  attached  to  the  bond  little 
oblong  notes,  or  promises  to  pay,  for  the  amount  of 
each  six  months’  interest,  so  that  all  you  have  to  do 


A  FINANCIAL  COURTSHIP. 


31 


when  the  six  months  rolls  around  is  to  cut  off  one  of 
these  little  so-called  coupons  and  present  it  to  your 
bank,  which  will  collect  it  for  you. 

“WHAT  ARE  REGISTERED  BONDS? 

“The  bonds  we  have  been  describing  are  what  are 
known  as  coupon  bonds.  But  there  is  a  form  known 
as  registered  bonds.  Coupon  and  registered  bonds 
differ  in  two  ways. 

“The  coupon  bond  is  negotiable,  that  is,  you  can 
transfer  it  to  another  person  simply  by  handing  it  to 
him,  and  his  title  is  perfect,  and  he  can  collect  the 
principal  and  interest  as  well  as  you  can. 

“  The  registered  bond  is  worth  nothing  to  any  one 
but  the  person  to  whom  it  is  issued,  for  the  name  of 
the  person  is  entered  in  a  register  with  the  number  of 
the  bond  (for  each  bond  is  numbered)  and  the  name 
is  also  written  in  the  face  of  the  bond,  so  that  no  one 
else  can  collect  it.  Instead  of  there  being  coupons  for 
you  to  cut  off,  the  treasurer  of  the  town  or  company 
issuing  has  to  send  you  a  check  every  six  months  for 
your  interest ;  as  a  matter  of  fact  they  are  not  much 
used  by  individuals,  or  at  least,  coupon  bonds  are 
vastly  more  popular. 

“  A  bond  is  sometimes  described  as  4  an  endorsement 
under  seal,’  and  the  dictionary  says  a  bond  4  is  a  certifi- 


32 


A  FINANCIAL  COURTSHIP. 


cate  of  ownership  of  a  specified  portion  of  a  capital 
debt  due  by  a  government,  a  city,  a  railroad  or  other 
corporation  to  individual  holders,  and  usually  bearing 
a  fixed  rate  of  interest.’  These  descriptions  would  not 
mean  much  to  you,  however. 

44 WHAT  IS  A  NOTE? 

4  6  A  note  is  simply  a  promise  to  pay  a  certain  sum 
of  money.  There  are  many  kinds.  For  instance  : 

“  Single  name  notes,  which  are  simply  the  promise 
to  pay  of  one  person,  or  a  corporation. 

“Notes  with  endorsements,  which  are  notes  of 
some  person  or  corporation  upon  which  another  writes 
his  name  as  endorser,  or  promisor  to  pay  if  the  maker 
of  the  note  does  not. 

“Notes  secured  by  collateral, — that  is,  the 
maker  of  the  note  deposits  with  the  one  loaning  the 
money  certain  bonds  or  stocks  or  other  valuable 
property  as  security. 

“Notes  may  be  made  payable  at  a  specified  date, 
say  six  months  or  a  year  from  the  date  of  making,  or 
may  be  payable  at  either  the  pleasure  of  the  lender  or 
borrower,  in  which  case  they  are  called  demand  loans, 
or  call  loans. 

“Notes  may  have  the  rate  of  interest  specified  (and 
this  is  generally  the  case  in  time  loans),  or  the  rate 


A  FINANCIAL  COUBTSHIP. 


33 


may  be  governed  by  the  current  market  rate  for 
money,  which  is  generally  the  rule  in  demand  loans. 
Of  course,  a  note  may  also  be  secured  by  a  mortgage, 
as  I  told  you  earlier  in  the  evening. 

“WHAT  IS  STOCK? 

“  In  order  to  tell  you  what  stock  is,  I  must  first  tell 
you  what  a  corporation  is;  for  without  corporations 
there  would  be  no  stock.  Corporations  are  a  crea¬ 
tion  of  modern  times.  They  are  a  means  of  associ¬ 
ating  a  number  of  people  together  in  some  common 
business  or  enterprise.  Formerly  this  was  done  by 
means  of  partnerships  ;  but  as  business  grew  and  com¬ 
merce  enlarged  and  spread,  it  was  found  that  great 
enterprises  were  too  large  for  a  few  people,  and  to 
gather  vast  numbers  into  a  partnership  was  impracti¬ 
cable.  There  was  also  the  dangerous  feature  that  in  a 
partnership  every  partner  was  liable  for  all  the  debts 
of  the  enterprise.  To  overcome  these  obstacles  cor¬ 
porations  were  devised.  They  are  the  creation  of  the 
state  and  are  subject  to  its  laws.  If  a  few  men  want 
to  engage  in  some  business  (manufacturing,  we  will 
say)  that  requires  large  capital,  they  go  to  the  legisla¬ 
ture  and  apply  for  a  charter  for  a  corporation,  naming 
the  incorporators,  or  men  who  ask  for  the  charter,  and 
stating  the  kind  of  business  they  propose  to  carry  on. 


34 


A  FINANCIAL  COURTSHIP. 


Generally  they  have  no  trouble  and  a  charter  is  given 
them  to  organize  a  corporation  with  a  certain  amount 
of  capital  divided  into  so  many  shares  (usually  of  $100 
each)  to  do  a  certain  kind  of  business  in  a  certain 
state  or  town.  Having  this  charter,  they  call  together 
all  the  men  interested  and  organize  a  company  or  a 
corporation  and  elect  officers,  etc.  They  then  vote  to 
issue  a  certain  amount  of  stock.  Let  us  say,  for 
instance,  that  the  capital  stock  is  to  be  $100,000. 
They  will  vote  to  issue  1,000  shares  of  $100  each. 
They  will  then  take  as  many  shares  as  they  want  and 
offer  the  rest  for  sale.  If  you  had  a  thousand  dollars 
and  believed  in  the  enterprise  you  could  buy  ten 
shares,  and  on  the  payment  of  the  money  they  would 
give  you  a  certificate  stating  that  you  were  the  owner 

of  ten  shares  of  the  capital  stock  of  the  - 

Manufacturing  Company.  If  the  company  proved  to 
be  a  success  and  earned  a  profit,  they  would  send  you 
once  or  twice  a  year  a  check  for  your  proportion  of 
the  net  earnings.  You  see  you  would  be  the  owner 
of  one  one-hundredth  of  the  property.  If  the  stock 
was  all  taken  and  fully  paid  for,  you  would  be  secure 
from  any  suits  for  the  debts  of  the  company;  and 
that  is  one  of  the  advantages  of  a  corporation  over  a 
partnership.  It  is  very  necessary  in  buying  stock  to 
know  whether  it  is  fully  paid  and  non-assessable.” 


A  FINANCIAL  COURTSHIP. 


35 


‘  ‘  What  do  you  mean  by  fully  paid  and  non-assess- 
able?  I  don’t  think  I  understand  that,”  said  Hannah. 

“Well,  take  the  manufacturing  company  which  I 
spoke  of  a  few  moments  since.  Under  the  laws  of 
most  states,  if  all  the  stock  was  sold  and  paid  for  at 
$100  per  share,  the  various  subscribers  would  not  be 
liable  for  any  of  the  debts  of  the  company.  If  the 
corporation  was  not  successful  and  ran  into  debt,  the 
only  recourse  the  creditors  would  have  would  be  to 
take  the  mill  or  whatever  property  the  company  had. 
They  could  not  ask  you  as  a  stockholder  to  pay  any  of 
the  debts.  All  you  would  lose  would  be  what  you  had 
invested  in  the  stock ;  but  if  all  the  stock  had  not  been 
sold  and  paid  for,  they  could  sue  you  individually  and 
make  you  pay  as  much  of  the  debt  as  you  had  the 
means.  In  other  words,  one  of  the  real  purposes  of  a 
corporation  is  defeated  and  it  practically  becomes  a 
partnership  with  individual  liability.  Is  that  clear?” 

“I  think  so.” 

“Furthermore,  in  some  states  there  is  a  law  which 
makes  every  stockholder  in  a  corporation  liable  for  the 
amount  of  his  stock  and  as  much  more.  This  is 
known  as  double  liabilitv  and,  while  it  is  a  mighty 
fine  thing  for  the  creditors  of  a  corporation,  it  be¬ 
hooves  one  to  examine  the  affairs  of  a  company  he 
is  investing  in  pretty  carefully  and  also  to  watch  it 


36 


A  FINANCIAL  COURTSHIP. 


continually.  Under  our  National  Bank  Act  the  stock 
in  all  national  banks  has  a  double  liability ;  therefore, 
if  you  own  stock  in  a  national  bank  and  it  fails,  the 
government  can  call  upon  you  to  pay  $100  in  cash 
for  every  $100  you  had  in  stock.” 

“  Good  gracious,  I  shouldn’t  think  any  one  would 
want  to  own  stocks  !  ”  exclaimed  Mary. 

“Perhaps  it  sounds  more  dangerous  than  it  is,”  said 
Mr.  Stanley,  with  a  smile,  “  but  I  never  advise 
women  to  buy  stocks  anyway.  There  are  too  many 
possibilities. 

“Now  I  think  I  have  given  you  all  you  can  digest 
this  evening  without  mental  dyspepsia,  and  I  suggest 
that  Miss  Mary  play  that  piece  of  Chopin’s  that  I  see 
on  the  piano.” 

With  some  blushing  and  hesitation  Mary  was 
induced  to  play ;  and  so  the  second  evening  closed  to 
the  evident  satisfaction  of  all. 


A  FINANCIAL  COURTSHIP. 


37 


CHAPTER  m. 

When  Mr.  Stanley  next  called  he  took  up  his 
lessons  where  he  had  left  off  and  went  on  as  follows  : 

“WHAT  IS  A  DEBENTURE? 

“You  will  occasionally  hear  of  a  debenture, 
although  it  is  a  term  used  much  more  abroad  than  in 
the  United  States.  It  is  rather  a  hard  thing  to  define, 
as  it  is  used  to  cover  several  kinds  of  securities ;  but 
generally  it  is  a  simple  coupon  bond  or  note,  a  simple 
promise  to  pay,  without  special  security  behind  it. 
It  is  put  in  the  form  of  a  bond  and  has  the  rather 
high-sounding  name  of  debenture  to  catch  the  unwary, 
but  you  always  want  to  know  what  it  is  secured  upon. 

‘  ‘  There  are  debentures  which  are  secured  by  mort¬ 
gages,  and  also  by  collateral,  but  the  word  is  used 
very  broadly  and  is  likely  to  lead  to  misapprehension 
and  a  poor  investment. 

*  ‘  I  have  now  pretty  well  covered  the  names  of  the 
tools  financiers  work  with.  There  are,  of  course, 
many  variations,  many  sub-titles,  many  offshoots. 
Having  explained  briefly  the  meaning  of  the  terms,  we 


38 


A  FINANCIAL  COURTSHIP. 


will  try  to  learn  something  of  the  character  and  value 
of  these  securities  and  investments  as  investments ; 
and  bear  in  mind  that  I  am  talking  all  the  time  about 
investments,  permanent  places  for  money  for  the 
purpose  of  getting  a  steady  income,  and  not  specula¬ 
tion  with  possible  large  losses  (as  well  as  gains)  and 
long  lapses  in  dividends. 

“GOVERNMENT  BONDS. 

“To  most  people  absolute  safety  is  summed  up  in 
these  two  words.  Whenever  a  promoter  wants  to 
impress  a  greenhorn  with  his  goods  he  says  they  are 
as  safe  as  a  government  bond.  That  is  the  last  word. 
In  a  way  he  is  right,  for,  if  our  government  bonds  are 
not  good  our  other  securities  are  likely  to  have  a 
checkered  career,  but  it  does  not  necessarily  follow, 
for  the  government  might  have  a  costly  war  and  run 
up  an  enormous  debt,  which  would  depreciate  its 
bonds  heavily,  while  state,  county  and  city  bonds, 
etc.,  might  not  be  affected.  You  will  find  the  bonds 
of  many  foreign  countries  selling  at  much  less  than 
par,  while  municipal  and  corporate  debts  in  those  coun¬ 
tries  are  at  a  premium.  Personally,  I  am  not  a  great 
believer  in  government  bonds  as  an  investment  for  the 
small  investor.  They  fluctuate  tremendously  at  times, 
as,  for  instance,  the  bonds  of  Russia  and  Japan  during 


A  FINANCIAL  COURTSHIP. 


39 


the  late  war,  and  our  own  bonds  at  the  time  of  the 
trouble  with  England  about  Venezuela  in  1895  —  our 
government  issues  declined  from  four  to  ten  points. 
Then,  too,  you  cannot  sue  a  government  and  are 
entirely  at  its  mercy. 

‘  ‘  In  the  case  of  this  country  our  government  holds 
a  unique  position,  for  our  debt  is  small,  our  resources 
great ;  but  it  is  not  altogether  the  smallness  of  the 
debt  nor  the  greatness  of  our  resources  that  makes 
our  bonds  sell  at  such  high  prices.  It  is  the  fact  that 
our  national  banking  system  is  largely  based  on 
the  bonds  of  the  government.  That  is,  if  a  national 
bank  wants  to  issue  notes  or  bank  bills  it  has  to  go 
into  the  market  and  buy  government  bonds  and  lodge 
them  with  the  United  States  Treasurer  as  security. 
This  makes  a  tremendous  and  fictitious  demand  for 
them  and  forces  the  price  above  their  normal  value. 
They  are  really  out  of  the  reach  of  all  but  the  very 
rich,  to  whom  the  question  of  income  is  not  material. 
At  the  present  time  the  various  government  issues 
are  selling  as  follows,  and  you  can  see  how  little  the 
income  is  from  them  : 

“The  2  per  cent,  bonds  redeemable  in  1930  will 
net,  at  103,  1.85  per  cent,  per  annum. 

“The  3  per  cent,  bonds  due  in  1918  will  net,  at 
102J,  1.80  per  cent,  per  annum. 


40 


A  FINANCIAL  COURTSHIP. 


“  The  4  per  cent,  bonds  due  in  1907  will  net,  at  103£, 
1.75  per  cent,  per  annum.  The  4  per  cent,  bonds  due 
in  1925  will  net,  at  130,  2.05  per  cent,  per  annum. 

“You  will  notice  that  only  one  of  them  will  pay 
you  2  per  cent,  per  annum.  Therefore,  if  you  put 
your  whole  property  into  them  you  would  get  an 
income  of  considerably  less  than  $1,000. 

“One  ought  to  say  in  favor  of  government  bonds 
that  they  can  be  turned  into  cash  ‘  at  the  drop  of  a 
hat,’  that  they  can  always  be  used  as  collateral,  and 
that  they  are  non-taxable.  I  should  say  that  our 
government  bonds  were  the  luxury  of  investment,  the 
pate  de  foie  gras  of  the  world  of  wealth.  To  the 
average  man  (or  woman)  who  lives  on  his  income 
they  are  not  attractive.” 

“  Mr.  Stanley,  what  is  premium?”  asked  Mary. 

“  That  is  a  term  that  puzzles  many  people.  I  think 
I  explained  to  you  what  par  value,  or  face  value,  is. 
In  stocks  the  par  or  face  value  is  usually  $100  (though 
it  may  be  $5  or  $10,  or  any  amount  established  when 
the  corporation  is  formed).  In  bonds  it  is  usually 
$1,000  (sometimes  $500  or  even  $100).  Now,  the 
price  of  bonds  and  stocks  is  regulated  by  the  laws  of 
demand  and  supply,  just  as  sugar,  coffee  or  any  other 
thing  of  value.  The  price  indicates  the  demand  for, 
or  the  scarcity  of,  or  the  value  in  the  public  mind.  If 


A  FINANCIAL  COURTSHIP. 


41 


the  bonds  are  scarce  and  hard  to  get  and  thought  well 
of,  the  price  will  advance  and  they  will  sell  for  more 
than  their  par  value,  — that  is,  a  $1,000  bond  may  sell 
at  $1,020.  The  $20,  or  excess  above  the  par  value, 
is  called  premium  (a  word  derived,  it  is  said,  from  two 
Latin  words  —  ‘  primo  ’  and  ‘  yum-yum  ’  —  the  latter 
word  expressing  the  satisfaction  one  feels  at  having 
his  bonds  sell  above  par) .” 

“  You  had  best  be  careful  how  you  put  any  jokes  in 
your  lessons,”  laughed  Hannah.  “  We  are  so  ignorant 
we  may  take  the  joke  in  earnest.” 

‘  ‘  I  have  no  fear.  But,  to  go  on ;  if,  for  any 
reason,  the  bonds  are  not  popular,  or  bear  too  low  a 
rate  of  interest,  or  are  not  in  demand,  the  price  may 
sink  below  the  par  or  face  value ;  for  instance,  a 
$1,000  bond  might  sell  at  $980.  The  $20  loss  in  this 
case  is  called  discount.  So  you  see  if  bonds  or  stocks 
sell  above  their  established  par  value  they  are  said  to 
be  selling  at  a  premium  ;  if  below,  at  a  discount.” 

“Is  it  safe,”  asked  Hannah,  “  to  buy  a  bond  that  is 
selling  at  a  discount?  ” 

“  I  find,”  said  Mr.  Stanley,  “  that  there  is  a  preva¬ 
lent  feeling  amongst  women  and  those  who  are  igno¬ 
rant  of  financial  affairs  that  if  a  bond  is  selling  at  a 
discount,  that  is,  below  par,  there  must  be  something 
wrong  with  it.  Now  while  it  is  true  that  the  market 


42 


A  FINANCIAL  COURTSHIP. 


price  of  a  security  fixes,  in  a  certain  way,  its  value 
and  the  estimation  which  the  general  public  put  upon 
it,  it  is  frequently  true  that  the  market  price  is  not  a 
sure  criterion  as  to  its  value.  As  I  have  said  in  some 
previous  part  of  my  talk,  it  is  largely  a  question  of 
supply  and  demand.  It  is  frequently  the  case  that 
bonds  are  brought  out  and  offered  to  the  public  in 
large  amounts  running  up  into  the  millions.  Now  it 
takes  some  time  to  distribute  such  an  issue  of  bonds  as 
that  and  get  it  into  the  hands  of  the  final  holders,  who 
are  the  investors.  The  first  purchasers  are  generally 
bond  houses  or  brokers,  who  act  as  middlemen  and 
distributers  and  gradually  sell  the  issue  to  investors. 
During  this  period  of  distribution  there  are  necessarily 
a  great  many  of  the  bonds  on  the  market,  offered  by 
various  houses  and  people,  and  this  has  a  tendency  to 
keep  the  price  of  the  bonds  down,  so  that  a  very  good 
bond  may  sometimes  sell  at  quite  a  discount.  After 
the  bonds  have  become  distributed  and  taken  off  the 
market  they  generally  begin  to  rise,  gradually  approach 
par  and  may  go  to  a  considerable  premium.  It  is 
rather  unusual  for  a  new  issue  to  sell  at  a  premium 
unless  it  is  some  very  high-grade,  well-known  bond. 

‘  *  Another  factor  which  governs  the  price  is  the  rate 
of  interest  which  the  bond  bears.  A  corporation 
naturally  wishes  to  place  its  loans,  particularly  if  they 


A  FINANCIAL  COURTSHIP. 


43 


are  to  run  a  long  term  of  years,  at  as  low  a  rate  as 
possible,  and  instead  of  selling  a  5  per  cent,  bond  at 
par,  they  will  very  often  offer  a  4  per  cent,  bond  at  a 
discount,  preferring  to  pay  the  discount  in  order  to 
get  a  4  per  cent,  rate  of  interest  for  a  long  period  of 
years  rather  than  to  place  the  loan  at  par  and  pay  5 
per  cent,  for  a  long  period  of  years. 

“It  is  quite  often  the  case  that  a  new  issue  of 
bonds,  even  bearing  as  high  a  rate  of  interest  as  5  per 
cent.,  will  sell  at  a  discount  when  first  brought  out 
because  the  security  is  not  well  known.  A  great 
many  issues  of  very  good  5  per  cent,  bonds  are  being 
offered  nowadays  on  water  power  companies,  inter- 
urban  railways,  electric  light  plants  and  other  public 
service  corporations,  and  many  of  these  issues  are 
brought  out  at  from  95  to  98.  This  price  appears 
very  low  for  a  sound  5  per  cent,  bond,  and  of  course 
each  case  must  be  carefully  investigated,  but  it  does 
not  necessarily  argue  that  the  investment  is  unsound 
because  it  is  sold  at  less  than  par.  In  course  of  time 
as  the  bonds  are  distributed  and  become  better  known 
the  price  generally  advances  to  par  and  even  higher. 

“  REAL  ESTATE. 

“You  often  hear  people  say  that  there  is  nothing 
safer  than  a  piece  of  good  real  estate, — it  can’t  run 


44 


A  FINANCIAL  COURTSHIP. 


away.  That  is  a  fallacy.  It  is  true  and  untrue.  As 
a  matter  of  fact,  there  is  nothing  more  uncertain,  more 
changeable,  more  tricky  than  real  estate.  It  takes 
a  very  wise  and  far-seeing  man  to  invest  in  it  judi¬ 
ciously.  While  it  cannot  run  away  its  value  can,  and 
frequently  does. 

64  Enormous  fortunes  have  been  made  in  real  estate* 
are  being  made  every  day,  —  see  the  Astor  fortune, 
for  example,  —  but  the  first  Astor  happened  to  get 
right  in  the  way  of  a  great  city  and  was  made  rich  in 
spite  of  himself.  You  hear  of  those  great  fortunes* 
but  you  don’t  hear  of  the  thousands  who  bought  in  the 
wrong  place  or  wrong  direction.  I  don’t  mean  to 
decry  real  estate  as  an  investment,  for  I  believe  in  it, 
but  it  takes  a  mighty  astute  man  to  figure  out  the  lines 
of  growth  in  this  ever-changing  country. 

“Fifty  or  seventy-five  years  ago  you  would  have 
said  nothing  could  be  safer  than  a  good  New  England 
farm,  at  which  time  land  was  selling  at  from  $25  to 
$100  an  acre.  To-day  you  can  buy  all  you  want  at 
from  $5  to  $20.  Thirty  or  forty  years  ago  there  were 
certain  streets  in  staid  old  Boston  with  great  brown- 
stone  houses,  imposing  and  dignified,  worth  from 
$50,000  to  $100,000  each,  and  one  would  have  said 
they  were  the  best  of  security.  What  could  change 
that  splendid  locality?  Presto  !  it  became  the  fashion 


A  FINANCIAL  COURTSHIP. 


45 


to  live  on  the  Back  Bay.  Those  splendid  homes  are 
to-day  cheap  boarding  houses  with  Chinese  laundries 
in  the  basements.  What  would  they  bring?  $15,000? 
$20,000  ?  Perhaps. 

4  ‘  Real  estate  is  as  capricious  as  a  young  girl  in  her 
first  season.  A  change  of  fashion,  a  new  street  car 
line,  an  elevated  road,  a  hundred  things  absolutely 
unforeseen,  and  the  value  goes  up  or  down  50  per 
cent,  in  a  night.  Take,  for  instance,  nearly  every 
large  city  except  New  York,  where  the  conditions  are 
exceptional  on  account  of  the  fact  that  the  city  is  built 
on  an  island,  and  watch  the  effect  of  the  great  ten, 
fifteen  and  twenty-story  buildings  now  going  up  on 
the  old  four  and  five-story  buildings  looked  upon 
with  pride  as  evidence  of  wealth  and  prosperity  a  few 
years  ago.  Some  one  will  say,  ‘Yes,  but  think  of  how 
many  have  made  fortunes  by  unexpected  rises  in  value 
of  real  estate !’  True,  but  what  I  am  trying  to  make 
clear  is  that  there  is  a  tremendous  element  of  luck  to 
be  considered  in  real  estate  investments  and  that  the 
ordinary  investor  hasn’t  the  skill  nor  experience  to 
deal  in  it.  If  you  can  get  a  man  of  skill  and  ripe 
judgment,  who  has  watched  the  ebb  and  flow  of  traffic 
and  is  not  influenced  by  his  own  investments,  you  may 
do  well,  but  my  advice  to  the  beginner  is  to  let  it 
alone  or  go  slowly. 


46 


A  FINANCIAL  COURTSHIP. 


“MORTGAGES. 

“A  mortgage,  if  properly  made,  is  generally  a  safe 
investment,  but  many  of  the  difficulties  which  surround 
investment  in  real  estate  also  spring  up  when  you  try 
to  buy  a  mortgage.  It  requires  careful  study  and 
delicate  weighing  of  the  probabilities.  This  is  par¬ 
ticularly  so  in  the  case  of  small  mortgages  which  must 
of  necessity  be  placed  on  residence  or  outlying  prop¬ 
erty.  Of  course  a  mortgage  on  inside  business  prop¬ 
erty  at  not  over  60  per  cent,  of  its  supposed  value 
rarely  goes  wrong.  These  mortgages  are  generally 
in  sums  of  $25,000  and  upward,  and  are  out  of  the 
reach  of  people  like  yourselves.  If  you  wanted  to 
buy  a  mortgage  you  would  go  to  some  real  estate 
dealer  or  person  who  places  mortgages  and  he  would 
show  you  a  list,  some  on  dwellings,  some  on  board¬ 
ing  houses,  some  on  apartments,  some  on  unoccupied 
land,  etc. 

4  ‘  To  begin  with,  you  would  want  to  cut  out  the 
loans  on  unoccupied  land  unless  the  margin  of  security 
was  very  large.  There  is  no  income  from  such  prop¬ 
erty  and  in  case  you  have  to  foreclose  the  mortgage 
and  take  the  property  you  get  no  income  and  have  to 
pay  heavy  taxes.  Small  stores  in  the  suburbs  are 
more  or  less  dangerous,  as  they  frequently  are  unsuc- 


A  FINANCIAL  COURTSHIP. 


47 


cessful.  Apartments  are  fickle  and  they  may  become 
very  unpopular  if  they  happen  to  get  in  a  few  unde¬ 
sirable  tenants.  The  most  desirable  small  loan  is  to 
some  respectable  man  on  his  own  home.  The  only 
trouble  is  that  such  loans  are  hard  to  get  and  generally 
go  to  the  savings  banks  at  comparatively  low  rates. 
The  banks  are  always  on  the  lookout  for  such  loans. 
Many  of  the  loans  on  the  market  are  on  apartment 
houses  and  single  houses  cheaply  built  by  speculators 
to  sell  land.  Be  careful  of  them.  Also  beware  of  loans 
on  mills  or  manufacturing  plants.  They  are  all  right  so 
long  as  the  business  is  profitable,  but  if  failure  comes 
or  they  are  swallowed  up  by  a  trust  the  security  is 
bad.  A  mill  out  of  commission  brings  but  a  fraction 
of  its  cost  as  a  rule.  Never  lend  on  personal  property 
or  stocks  of  goods,  for  you  cannot  watch  your  security. 
It  sometimes  takes  wings.  As  a  rule,  never  lend  to 
friends.  They  too  often  expect  to  pay  only  in  friend¬ 
ship,  and  when  they  become  your  debtors  they  cease 
to  be  even  friends. 

‘  ‘  In  taking  a  mortgage  two  things  are  to  be  studied 
carefully,  — the  moral  risk  and  the  value  of  the  security. 
By  the  moral  risk  I  mean  the  character  of  the  bor¬ 
rower,  for  even  if  the  security  proves  poor,  and  yet 
the  borrower  is  a  man  of  character,  he  will  work  his 
fingers  to  the  bone  to  pay  you.” 


48 


A  FINANCIAL  COURTSHIP. 


‘‘One  of  my  friends,”  said  Hannah,  “told  me  she 
had  placed  some  money  in  the  West  on  a  farm 
mortgage  at  7  per  cent.  Are  those  safe?” 

“Why,  a  mortgage  in  the  West  is  just  like  a 
mortgage  in  the  East,  or  anywhere  else.  It  depends 
upon  the  property  mortgaged  and  the  local  conditions. 
If  you  can  go  and  examine  the  property  yourself,  or 
can  send  some  one  who  knows  his  business,  it  is  safe 
enough,  but  each  case  must  be  settled  by  itself  and 
stand  on  its  own  bottom.  You  can’t  say  as  a  general 
thing  western  mortgages  are  good  any  more  than  you 
can  say  eastern  mortgages  are  good.  I  should  want 
to  know  a  lot  about  a  man’s  character  and  ability  and 
knowledge  before  I  allowed  him  to  place  money  on 
mortgages  for  me  where  I  could  not  see  the  property. 
Twenty  years  ago  there  was  a  perfect  craze  in  the 
East  for  buying  western  farm  and  town  mortgages. 
Hundreds  of  millions  were  loaned  on  them  at  very 
high  rates ;  the  loans  were  in  many  cases  carelessly 
made,  and  there  was  widespread  trouble  and  much 
loss.  Since  then  the  West  has  grown  rich  and  has 
money  to  loan.  You  can’t  loan  money  in  the  good 
sections  of  the  West  at  much  higher  rates  than  you 
get  here, — that  is,  the  prevailing  rate  here  is  5  per 
cent;  in  the  West  it  is  6,  but  after  you  have  paid 
your  agent  and  your  expenses  of  examination,  etc., 


A  FINANCIAL  COURTSHIP. 


49 


you  can’t  net  more  than  5  per  cent.  At  whatever  rate 
a  western  mortgage  is  offered  here,  remember  that  the 
western  agent  is  charging  the  farmer  at  least  1  per 
cent,  more  for  his  profit.  So,  if  you  are  offered  a 
western  mortgage  to  pay  you  6  per  cent. ,  you  may  be 
sure  the  farmer  himself  is  paying  7  or  8  per  cent. 
Now,  if  the  farmer  has  good  security  he  does  not 
have  to  pay  such  rates  in  the  West  to-day.  They 
have  too  much  money  there  ready  to  be  loaned  at 
more  reasonable  rates.  To  sum  it  up,  the  same  rules 
apply  to  western  mortgages  as  to  eastern, — reasonable 
rates  of  interest  and  a  personal  examination  of  the 
property. 

“MUNICIPAL  BONDS. 

4  4  In  order  to  make  myself  clear  I  must  first  define 
the  word  4  municipal,’  for  I  don’t  suppose  you  have  a 
very  clear  idea  of  it,  have  you?” 

The  sisters  reluctantly  confessed  that  they  thought 
it  had  something  to  do  with  a  city,  but  were  not  quite 
sure. 

“For  convenience  and  for  local  self-government 
the  state  is  subdivided  into  counties,  cities,  towns  and 
schoul  districts.  There  are  also  what  is  known  as 
water  precincts,  fire  precincts,  park  districts,  etc.  As 
a  rule,  school  districts,  precincts,  etc.,  are  subdivisions 
of  a  city  or  a  town,  though  in  some  states  each  county 


50 


A  FINANCIAL  COURTSHIP. 


is  divided  into  several  school  districts.  These  various 
subdivisions  of  the  state  are  created  by  the  state  and 
get  their  charters  from  the  legislature.  They  are, 
therefore,  purely  arbitrary  creations  of  the  state  and 
are  known  generally  as  municipalities.  A  municipal 
bond,  therefore,  is  a  bond  issued  by  a  municipality, 
that  is,  a  county,  city,  town,  precinct  or  district.” 

“  But,”  said  Hannah,  “  why  do  towns  have  to  issue 
bonds?  I  thought  they  raised  their  money  by  taxes. 
What  do  we  pay  taxes  for?  ” 

64  Well,”  replied  Mr.  Stanley,  4 4  they  do  raise  a 
great  deal  of  it  that  way,  but  sometimes,  for  unusual 
expenditures,  they  borrow  the  money  by  issuing  bonds 
payable  at  some  future  date.  For  instance,  you 
remember  that  this  town  put  in  a  system  of  water 
works  last  summer.  The  cost  of  it  was  $150,000. 
Now,  if  they  had  raised  the  whole  of  that  sum  this 
year  by  levying  a  tax  for  the  entire  amount  it  would 
have  nearly  bankrupted  the  whole  town.  Your  share 
of  it  would  have  made  a  large  hole  in  your  income. 
Instead  of  that,  the  town  issued  a  bond  or  its  promise 
to  pay,  bearing  interest  at  4  per  cent,  per  annum. 
These  bonds  become  due  in  instalments  of  $15,000  a 
year  for  ten  years.  That  is,  each  year  for  the  next 
ten  years  the  town  will  levy  a  tax  amounting  to 
enough  money  to  pay  the  annual  interest  on  the  loan 


A  FINANCIAL  COURTSHIP. 


51 


at  4  per  cent,  and  the  $15,000  instalment.  At  the  end 
of  ten  years  the  debt  will  all  be  paid  and  the  town  will 
own  the  water  works  free  and  clear. 

“  Sometimes  towns  adopt  the  policy  of  letting  the 
next  generation  pay  a  share  of  the  civic  improvements, 
and  make  the  bonds  payable  thirty,  forty  or  fifty  years 
hence ;  but  the  best  practice  is  to  pay  them  inside  of 
twenty  years.” 

“How  do  they  go  to  work  to  issue  bonds?”  ven¬ 
tured  Mary  timidly. 

“Why,  you  know  a  town  in  New  England  is  run 
by  a  set  of  three  men  known  as  selectmen.  If  it  is 
decided  to  issue  bonds,  these  men  will  put  a  paragraph 
in  the  call  for  the  annual  town  meeting,  stating  that 
one  of  the  things  to  be  considered  is  the  question  of 
issuing  $150,000  of  bonds  to  build  water  works. 
When  the  town  meeting  occurs,  some  one  will  intro¬ 
duce  a  resolution  that  the  town  bond  itself  in  the  sum 
of  $150,000  to  build  water  works,  specifying  the  rate 
of  interest  the  bonds  are  to  bear,  the  length  of  time 
they  are  to  run,  and  how  they  are  to  be  sold.  After 
more  or  less  discussion  the  resolution  is  adopted,  and 
then  the  selectmen  go  to  work  and  get  the  bonds 
printed  or  lithographed,  and  publish  a  notice  in  the 
papers  that  on  such  a  day,  at  such  an  hour,  they  will 
receive  bids  for  the  bonds.  The  dealers  in  bonds  see- 


52 


A  FINANCIAL  COURTSHIP. 


ing  this  notice  send  in  their  sealed  bids.  They  are 
opened  and  the  bonds  awarded  to  the  highest  bidder. 
Then  the  dealer  who  gets  the  bonds  sells  them  to 
people  like  you  or  to  the  savings  banks,  adding  some¬ 
thing  to  the  price  he  paid  for  them  for  his  profit. 
After  the  bonds  are  issued,  the  town  has  to  levy  a  tax 
each  year  sufficient  in  amount  to  pay  the  interest  on 
the  whole  amount,  and  to  provide  for  the  part  of  the 
principal  sum  which  becomes  due.  In  this  way  the 
bonds  are  gradually  called  in  and  retired.  Of  course, 
it  would  be  cheaper  for  the  town  to  levy  a  tax  to  pay 
the  whole  amount  in  one  year,  but  the  people  would 
not  submit  to  it. 

4  6  Now,  there  are  all  kinds  of  municipal  bonds  and 
there  is  quite  a  difference  in  their  value.  There  are 

WATER  BONDS,  SCHOOL  BONDS,  COURT  HOUSE  BONDS, 
FUNDING  BONDS,  CITY  HALL  BONDS  and  SEWER  BONDS, 
the  purposes  of  which  are  all  sufficiently  indicated  by 
their  names.  These  bonds  are  all  for  good  purposes 
and  the  credit  of  the  whole  town  is  usually  pledged  for 
their  payment;  but  there  are  certain  classes  of  bonds 
which  do  not  stand  as  well,  and  which  I  advise  you  to 
let  alone.  There  are  what  are  known  as  special 
assessment  bonds;  that  is,  instead  of  being  paid 
directly  by  a  tax  on  all  property  in  the  town,  they  are 
paid  by  a  tax  on  a  special  part  of  the  town.  For 


A  FINANCIAL  COURTSHIP. 


53 


instance,  if  you  wanted  to  have  the  road  in  front  of 
your  place  macadamized,  you  might  get  the  town  to  do 
it,  but  they  would  issue  bonds  payable  by  a  tax  against 
the  abutting  property.  Thus,  only  the  people  directly 
benefited  or  the  people  whose  property  fronted  on  the 
road  would  be  taxed.  You  can  readily  see  that  the 
security  is  not  as  good,  and,  as  a  matter  of  fact, 
the  people  so  taxed  frequently  rebel.  Lawsuits  follow, 
and  the  payment  of  the  bond  is  involved.  It  is  a  safe 
rule  never  to  buy  a  special  assessment  bond.  Always 
inquire  whether  the  property  of  the  whole  town  is 
pledged. 

64  Another  class  to  be  avoided  is  bonus  bonds,  which 
I  am  glad  to  say  are  not  very  common.  To  illustrate  : 
It  sometimes  happens  that  a  town  wants  to  induce 
some  manufacturing  concern  to  locate  within  its 
borders.  The  manufacturing  company  says  it  will 
come  if  the  town  will  supply  a  mill.  The  town  goes  to 
work  and  issues  bonds  for  the  purpose.  These  bonds 
are  nearly  always  declared  illegal  if  they  get  into 
the  courts.  Another  unsafe  bond  is  what  is  known 
as  a  railroad  aid  bond,  which  is  very  similar  to  a 
bonus  bond.  We  will  suppose  it  is  proposed  to  run 
a  railroad  somewhere  near  the  town.  The  promoters 
say  to  the  officers  of  the  town,  6  We  will  come  through 
your  place  if  you  will  give  us  a  certain  sum  of  money/ 


54 


A  FINANCIAL  COURTSHIP. 


To  raise  this  sum  the  town  issues  bonds  and  gives  the 
proceeds  to  the  promoters.  There  have  been  many 
cases  where  the  road  was  never  built,  and  the  people, 
feeling  defrauded,  repudiated  the  bonds. 

“I  heard  a  good  story  once  about  an  issue  of  rail¬ 
road  aid  bonds  in  a  western  territory. 

4  6  A  certain  county  voted  to  issue  a  block  of  railroad 
aid  bonds  in  order  to  get  a  railroad  built  through  the 
county.  These  bonds  were  going  to  be  given  to  the 
contractor,  one  half  of  the  issue  when  the  road  was 
half  completed,  and  the  other  half  when  the  whole 
road  was  done.  The  contractor  completed  the  first 
half  of  the  road,  and  then  called  upon  the  county  com¬ 
missioners  to  go  over  it  and  inspect  it,  which  they  did. 
They  then  delivered  him  half  the  issue  of  bonds.  The 
contractor  then  quietly  pulled  up  all  the  rails  on  the 
first  half  of  the  road,  laid  them  down  on  the  last  half 
of  the  road,  and  then  took  the  commissioners  over  the 
last  half  of  the  road,  and  got  the  rest  of  the  bonds. 
It  is  quite  probable  the  commissioners  were  in  collu¬ 
sion  with  the  contractor.  In  any  event,  the  people  of 
the  county  later  on  discovered  the  fraud,  and  threat¬ 
ened  to  repudiate  the  bonds.  The  contractor  said  if 
they  repudiated  the  bonds  he  would  pull  up  the  track. 
The  county  did  repudiate  the  bonds,  and  the  con¬ 
tractor  pulled  up  the  tracks  and  ties,  took  them  to 
California,  and  built  another  road  with  them. 


A  FINANCIAL  COURTSHIP. 


55 


“Years  afterwards  the  territory,  in  order  to  clear 
up  the  financial  situation  of  some  of  the  counties  and 
cities,  made  a  large  issue  of  bonds  to  refund  the 
outstanding  debts  of  the  various  municipalities.  In 
other  words,  people  holding  the  county  and  city  bonds 
were  allowed  to  exchange  them  for  the  territorial 
bonds.  The  original  contractor  for  the  road  in  ques¬ 
tion,  hearing  of  this,  went  to  work  and  bought  up 
these  old  defaulted  bonds  at  something  like  ten  cents 
on  the  dollar,  went  to  the  territorial  officers,  and 
exchanged  them  for  the  territorial  bonds,  which  he 
afterwards  sold  at  par. 

‘  ‘  I  am  informed  that  this  is  an  actual  occurrence 
and  that  the  story  is  absolutely  true.  It  seems  almost 
incredible,  but  it  shows  what  loose  methods  prevailed 
in  the  earlier  days.  Such  a  thing  would  be  impossible 
at  this  time.  Such  bonds  are  rarely  issued  now,  but 
thirty  years  ago  they  were  very  common  in  the  West 
and  the  South,  and  resulted  in  large  losses. 

‘  ‘  To  sum  up  :  If  you  are  going  to  buy  a  municipal 
bond,  see  that  it  is  the  obligation  of  the  whole  munici¬ 
pality,  whether  it  is  a  county,  city,  town,  water  dis¬ 
trict,  school  district,  or  fire  precinct.  See  that  the 
object  for  which  they  are  issued  is  something  which 
will  benefit  all  the  people  alike  and  is  one  in  which 
all  are  interested, — such  purposes  as  water,  schools, 


56 


A  FINANCIAL  COURTSHIP. 


sewers,  court  house,  city  hall,  parks,  cemeteries,  etc. 
A  refunding  or  a  funding  bond  is  generally  safe,  for  it 
refunds  a  debt  which  has  stood  the  test  of  time  ;  but  it 
is  well  in  buying  a  refunding  bond  to  ask  the  purpose 
of  the  original  issue,  to  see  that  it  was  not  a  special 
assessment,  bonus  or  railroad  aid  bond. 

“A  municipal  bond  may  be  either  coupon  or 
registered ;  that  is,  it  may  be  payable  to  bearer  and 
have  coupons  attached,  which  you  cut  off  every  six 
months  and  collect  through  your  bank,  and  this  is  the 
usual  form ;  or  it  may  be  a  registered  bond  made  out 
in  the  name  of  the  owner  and  the  interest  will  be  sent 
by  the  town  treasurer  every  six  months  by  check. 
Registered  bonds  are,  of  course,  safer  in  case  of  fire  or 
robbery,  but  are  a  nuisance  if  you  want  to  sell  them  or 
use  them  as  collateral.  With  the  present  abundance  of 
good  safe  deposit  vaults  where  you  can  have  a  perfectly 
safe  place  for  your  securities  for  $5  or  $10  per  annum, 
there  is  no  need  of  registered  bonds.  Every  one 
should  have  a  box  in  a  safety  vault  even  for  one’s 
private  papers,  such  as  insurance  policies,  wills,  deeds, 
etc.  It  is  the  cheapest  kind  of  insurance  and  the 
mental  relief  is  worth  the  price.  Never  keep  valuable 
papers  or  securities  in  the  house.  I  have  known  of 
many  cases  where  people  kept  thousands  of  dollars  of 
securities  in  old  teapots,  hair-covered  trunks,  under 


A  FINANCIAL  COURTSHIP. 


57 


carpets  and  between  mattresses.  Every  now  and  then 
a  house  burns  down  and  all  the  precious  savings  go  up 
in  smoke.” 

6 ‘Mr.  Stanley,  I  am  following  you  very  well,  I 
think,  but  will  you  explain  to  us  what  would  happen  if 
a  town  refused  to  pay  its  bonds  when  due?”  asked 
Hannah. 

“  Certainly,”  replied  the  lawyer;  “  if  the  town  did 
not  pay,  or  defaulted,  as  we  say,  you  would  employ  an 
attorney  and  he  would  apply  to  the  court  for  a  man¬ 
damus —  which  is  a  legal  phrase  for  an  order  —  to 
compel  the  selectmen  to  levy  a  tax  to  pay  the  bonds. 
The  case  would  come  up  for  trial  in  due  course,  and  if 
the  court  decided  your  claim  was  valid  it  would  issue  a 
mandamus  (or  order)  to  the  selectmen  to  levy  a  tax 
sufficient  in  amount  to  pay  your  bonds  and  the 
interest.” 

66  Supposing  the  selectmen  refused  to  do  it?”  said 
Mary  timidly. 

“That  rarely  occurs;  but  if  it  did,  the  selectmen 
would  be  guilty  of  contempt  of  court,  and  the  judge 
would  have  them  arrested,  fined  and  sent  to  jail.  No, 
if  you  get  a  mandamus  you  will  get  your  money. 

“  One  great  advantage  of  a  municipal  bond  is  that 
it  is  practically  a  first  mortgage  on  all  the  property 
in  the  town,  for  taxes  have  to  be  paid  before  any- 


58 


A  FINANCIAL  COURTSHIP. 


thing  else.  They  are  a  lien  on  the  property  and 
a  cloud  on  the  title  until  paid,  and  the  property  can 
be  seized  and  sold  if  not  paid.  It  does  not  matter 
whether  the  tax  was  levied  after  the  property  was 
mortgaged,  even.  They  are  a  prior  lien  ahead  of  all 
other  claims.” 

*  ‘  I  don’t  understand  what  you  mean  when  you  speak 
of  net  return,”  said  Hannah. 

‘  ‘  Many  people  are  at  a  loss  to  understand  what  is 
meant  when  you  tell  them  a  bond  will  net  so  much,  or 
a  certain  per  cent.  I  will  try  and  explain  this. 

“If  you  buy  a  6  per  cent.  $1,000  bond  at  par  you 
pay  just  $1,000  for  it,  and,  of  course,  your  return  is 
$60  per  annum,  or  6  per  cent. ;  but  if  you  pay  a 
premium  for  the  bond,  you  are  investing  more  than 
$1,000,  while  your  income  remains  still  $60.  Now, 
$60  is  6  per  cent,  of  $1,000,  but  if  you  should  pay, 
we  will  say,  a  premium  of  5  per  cent.,  or  $1,050 
for  the  bond,  your  $60  would  not  be  6  per  cent, 
upon  $1,050.  You  have  invested  more  money  to 
get  the  6  per  cent,  than  when  you  pay  par  for  the 
security. 

“  Now,  the  question  is,  at  just  what  rate  of  interest 
have  you  invested  your  money.  To  arrive  at  this, 
you  divide  the  amount  of  income  which  you  receive 
by  the  amount  that  you  pay  for  the  bond.  In  this 


A  FINANCIAL  COURTSHIP. 


59 


case  you  would  divide  $60  by  $1,050  and  the  result 
would  be: 

$1,050)$60.0000(.0571  + 

52  50 

7  500 
7  350 

1500 

1050 

450 

or  a  little  less  than  5|  per  cent,  per  annum.  This  is 
the  net  result  of  the  investment,  so  that,  when  any¬ 
body  says  the  bond  will  net  so  much,  he  means  that 
this  is  the  net  return  on  the  money  invested. 

“If  the  bond  is  sold  below  par,  the  problem  is 
figured  out  in  the  same  way. 

“In  actual  practice,  all  financial  houses  use  a  set  of 
carefully  prepared  tables,  just  as  they  do  for  figuring 
interest,  not  relying  upon  the  lead  pencil  or  the  mathe¬ 
matics  of  any  clerk. 

“As  a  matter  of  fact,  the  above  method  of  com¬ 
putation  should  only  be  applied  to  stocks,  which  do 
not  mature  at  any  specified  time,  but  in  the  case  of 
bonds,  which  mature  at  a  certain  date,  the  strictly 
accurate  method  of  computation  is  rather  complicated; 
too  much  so  for  the  average  person  to  figure,  and  the 
only  safe  way  is  to  use  tables  prepared  for  that 


60 


A  FINANCIAL  COURTSHIP. 


purpose.  The  method  I  have  suggested  will  do 
roughly,  and  is  accurate  as  far  as  stocks  are  con¬ 
cerned,  but  not  for  bonds  maturing  at  a  fixed  date. 

“  The  question  of  how  long  the  bond  has  to  run 
enters  into  the  computation,  and,  if  one  has  much  of 
this  sort  of  work  to  do,  it  is  advisable  to  have  a  set  of 
these  tables  (which  can  be  readily  procured)  at  hand, 
as  they  tell  at  a  glance  just  what  any  bond  bearing  any 
rate  of  interest  will  net  at  any  given  price,  if  you 
know  the  length  of  time  the  security  has  to  run. 

“STATE  BONDS. 

“  This  is  a  subject  I  can  deal  with  very  briefly,  for 
the  best  state  bonds  sell  so  high  they,  like  govern¬ 
ment  bonds,  are  out  of  the  reach  of  most  people.  If 
they  are  issued  by  a  good  state  with  a  high  standard  of 
honor,  they  are  a  very  high-class  security,  and  sell  at 
a  price  to  net  from  3  to  3  1-2  per  cent.  During  the 
War  of  the  Rebellion,  Massachusetts  met  all  its  obli¬ 
gations  in  gold,  even  when  gold  was  selling  at  a  stu¬ 
pendous  premium,  while  many  of  the  southern  states, 
overwhelmed  with  debt,  repudiated.  The  great  out 
about  a  state  bond  is  that,  under  the  constitution,  you 
cannot  sue  a  sovereign  state,  so  that  if  a  state  declines 
to  pay,  you  are  powerless.  Therefore,  if  you  buy  a 
state  bond,  choose  your  state  with  care.  Nearly  all 


A  FINANCIAL  COURTSHIP. 


61 


the  states,  I  am  happy  to  say,  are  now  on  a  sound 
financial  basis,  and  there  is  small  risk.  Still,  I  prefer 
a  good  municipal  to  either  a  state  or  a  government 
bond. 

“  STOCKS. 

“This  is  a  tremendous  subject,  and  can  only  be 
treated  in  a  very  general  way.  I  have  already  told 
you  that  a  certificate  of  stock  simply  represents  your 
ownership  of  such  a  proportion  of  the  capital  stock  of 
a  corporation.  In  case  there  is  a  debt  upon  the  com¬ 
pany,  such  as  bonds,  a  mortgage,  or  floating  debt 
(so-called) ,  the  stock  represents  the  equity  over  and 
above  said  debt.  If  the  company  is  successful,  your 
share  of  the  net  earnings  is  sent  you  at  regular  periods 
in  the  form  of  checks. 

“Stocks  have  a  great  attraction  for  many  people, 
particularly  for  women.  They  see  them  rise  rapidly 
at  times,  they  hear  of  great  fortunes  being  made  in 
them,  etc.  It  is  true  that  such  fortunes  are  made,  but 
they  are  made  by  the  big  plungers  and  speculators  and 
not  by  the  little,  inexperienced  dabblers.  Great  fortunes 
are  made  and  lost,  and  thousands  of  little  fortunes 
are  swept  away  annually.  If  the  small  investor  con¬ 
fined  himself  to  the  high-grade  dividend-paying  stocks 
(and  did  not  buy  them  on  a  margin) ,  he  would  not  run 
much  risk  ;  but  this  is  seldom  the  case.  He  is  attracted 


62 


A  FINANCIAL  COURTSHIP. 


by  the  promise  of  big  dividends  and  buys  a  stock 
because  it  looks  cheap  and  a  great  rise  is  predicted  ; 
and  the  gamblers  in  Wall  Street  get  his  little  all.  If 
one  buys  the  best  stocks,  they  do  not  pay  a  much 
larger  income  than  conservative  bonds,  indeed,  they 
sell  on  somewhat  the  same  basis  ;  but  even  these 
so-called  gilt-edged  stocks  are  subject  at  times  to 
manipulation  and  rapid  changes  in  price.  These 
changes  need  not  worry  the  careful  holder  who  has 
bought  and  paid  for  his  stock.  So  long  as  the  divi¬ 
dends  come  regularly  and  the  property  is  kept  up  it 
does  not  matter  much.  I  am  referring  now  to  the  best 
railroad  stocks,  such  as  Pennsylvania ;  New  York 
Central ;  New  York,  New  Haven  and  Hartford  ;  Pullman 
Car  Company,  and  others. 

“  There  is  still  another  line  of  stocks  which  attract 
many  on  account  of  their  large  dividends.  I  refer  to 
the  INDUSTRIAL  SHARES  :  SUGAR,  STEEL,  SMELTING, 
etc.  There  are  hundreds,  but  these  are  the  most 
prominent.  The  best  of  them  are  semi-conservative, 
but  hardly  the  thing  for  a  woman. 

64  Great  fortunes  have  been  made  in  mining  stocks, 
—  gold,  silver,  copper,  lead  and  iron;  but  the  chances 
of  a  woman  hitting  the  right  one  are  as  uncertain  as 
of  her  hitting  a  bull’s  eye  with  a  stone.  She  had 
better  pass  them  by.  Women  are  the  easy  prey  for 
the  mining  shark  with  a  salted  mine  to  sell. 


A  FINANCIAL  COURTSHIP. 


63 


‘  ‘  To  sum  up  the  stock  question  :  My  advice  would 
be  either  to  buy  the  most  expensive,  most  conservative, 
best-established  stocks,  like  those  named,  or  let  stocks 
alone.  Perhaps  the  safest  course  for  a  woman  is  to 
confine  herself  to  bonds  and  mortgages.  She  stands 
less  risk  of  loss,  for  she  is  nearer  the  bottom  of  things. 
While  she  will  not  share  in  the  great  advances,  she 
does  not  take  the  risk  of  the  big  losses.” 

“How  would  you  rate  investments,  Mr.  Stanley, 
—  in  what  order?”  said  Hannah. 

“  About  as  follows  for  a  woman  : 

“  1st.  Municipal  Bonds. 

“  2d.  First  Mortgage  Corporation  Bonds. 

“3d.  Real  Estate  Mortgages. 

“  4th.  Government  Bonds. 

“  5th.  State  Bonds. 

“  6th.  High-grade  Stocks. 

“  It  requires  very  little  skill  or  judgment  to  buy  the 
first,  for  they  may  be  said  to  be  generally  safe.  The 
courts  of  the  country  have  very  carefully  guarded  the 
credit  of  our  municipalities,  and  where  they  are  offered 
by  a  reputable  bond  house,  which  has  made  a  proper 
examination,  such  as  most  of  them  make,  you  are  very 
safe  in  their  purchase.  The  second  (first  mortgage 
corporation  bonds)  requires  more  care  and  a  study  of 


64 


A  FINANCIAL  COURTSHIP. 


the  property  mortgaged.  They  should  not  be  bought 
of  any  but  first-class  houses,  and  you  should  know 
that  the  property  is  not  over-mortgaged,  that  the 
corporation  is  a  sound  one,  and  that  its  earnings  are 
sufficient  to  pay  its  operating  expenses,  the  interest 
on  its  bonds,  and  a  fair  margin  over.  The  character 
of  the  business  in  which  the  corporation  is  engaged  is 
also  well  worth  considering.  The  third  requires  the 
skill  and  experience  of  a  good  real  estate  man.  The 
fourth  requires  no  skill,  simply  money.  The  fifth 
calls  for  a  study  of  the  present  debt  and  past  history 
of  the  state.  The  sixth  requires  careful  study  of  the 
corporation,  and  the  advice  of  an  honest  broker.” 

In  this  pleasant  and  instructive  manner  the  weeks 
sped  by.  Two  evenings  of  each  week  our  lawyer- 
financier  was  sure  to  be  found  at  the  Allen  homestead. 
The  acquaintance  ripened  into  intimacy  and  then  into 
warm  friendship.  The  lessons  continued,  interspersed 
with  an  occasional  examination  and  music.  At  last 
the  subject  of  finance  as  a  reason  for  calling  was 
exhausted,  for  the  sisters  had  really  mastered  the 
subject,  or  at  least  knew  enough  so  that  there  was  no 
fear  of  their  losing  their  money.  When  it  became 
evident  that  they  needed  no  more  training,  he  began 
to  read  to  them  from  his  favorite  authors.  Of  course 
the  neighbors  shook  their  heads,  looked  knowingly  at 


A  FINANCIAL  COURTSHIP. 


65 


each  other  and  said,  “Well,  did  you  ever?”  etc.,  but 
Mr.  Stanley  pursued  the  even  tenor  of  his  way 
undisturbed. 

One  morning  in  June,  Mary  came  up  behind  her 
sister’s  chair  so  that  the  older  girl  could  not  see  her 
face  and  said:  “Hannah,  do  you  remember  the  day 
after  father  died  when  we  were  wishing  we  had  some 
man  in  the  family  to  whom  we  could  go  for  advice  ?  ” 

“  Yes,  very  well.” 

“We’re  going  to  have  one.” 

“Mary,  what  do  you  mean?”  and  Hannah  sprang 
to  her  feet  and  looked  at  her  sister.  One  glance  at 
the  glistening  eyes  and  flushed  cheeks  told  the  story ; 
she  threw  her  arms  around  Mary’s  neck,  and  there 
was  sobbing  with  the  little  half-articulated  cries  and 
kisses  that  women  love. 


POSTSCRIPTUM 


When  I  had  finished  this  little  story,  some  friend 
who  glanced  it  over  said,  “  Well,  what  did  they  finally 
put  their  money  into  ?  ” 

I  think  this  is  a  fair  question,  and  I  will  tell  you 
confidentially  what  they  did.  The  reason  I  did  not 
include  it  in  the  story  was  because  New  England 
women  hate  to  have  any  one  know  about  their  affairs. 

With  Mr.  Stanley’s  advice,  they  invested  their 
money  as  follows: 

They  placed  $2,000  in  the  local  savings  banks 
($1,000  in  each)  at  3£  per  cent,  per  annum,  in  order 
that  they  might  have  a  little  money  at  hand  in  case 
of  urgent  need. 

$5,000  was  placed  on  a  local  mortgage  at  5  per  cent., 
upon  property  well  known  to  all  of  them. 

$5,000  was  placed  in  City  of  Chicago,  Ill.,  4  per 
cent,  bonds  at  a  price  to  net  3.80  per  cent,  per  annum. 

$5,000  was  placed  in  the  4  per  cent,  bonds  of  their 
town  at  a  price  to  net  3.65  per  cent,  per  annum. 

$5,000  was  placed  in  the  3J  per  cent,  bonds  of  the 
City  of  New  York  at  par,  netting  3J  per  cent,  per 


annum. 


POSTSCRIPT  UM. 


67 


$5,000  was  placed  in  the  4£  per  cent,  bonds  of  a 
Washington  school  district  at  a  price  to  net  4£  per 
cent,  per  annum. 

$5,000  was  placed  in  the  4£  per  cent,  bonds  of  a 
Colorado  school  district  at  a  price  to  net  4J  per 
cent,  per  annum. 

$5,000  was  placed  in  the  5  per  cent,  first  mortgage 
bonds  of  an  electric  light  and  gas  company  of  one  of 
our  large  western  cities,  at  par,  netting  5  per  cent, 
per  annum. 

$5,000  was  placed  in  the  5  percent,  first  mortgage 
bonds  of  a  strong  interurban  electric  railway  at  par, 
netting  5  per  cent,  per  annum. 

$2,000  was  placed  in  the  3  per  cent,  bonds  of  the 
United  States  government  at  a  price  to  net  1.90  per 
cent,  per  annum. 

$5,000  was  placed  in  the  5  per  cent,  bonds  of  the 
Chicago  Junction  Railways  &  Union  Stock  Yards  of 
Chicago  at  a  price  to  net  4  per  cent,  per  annum. 

I  have  listed  the  whole  investment  in  a  little  table 
below,  where  it  will  be  perhaps  more  clearly  under¬ 
stood.  You  will  see  that  the  investments  are  distrib¬ 
uted  over  deposits  in  savings  banks,  first  mortgages  on 
real  estate,  municipal  bonds,  school  bonds,  first  mort¬ 
gage  corporation  bonds  and  United  States  government 
bonds.  The  total  amount  invested  was  $49,974,  leav- 


68 


POSTSCRIPTUM. 


in g  a  small  balance  of  cash  in  their  hands.  The  total 
income  from  the  investment  per  annum  was  $2,155,  or 
an  average  of  about  4J  per  cent,  upon  their  principal. 
Two  girls,  living  quietly  at  home,  ought  to  be  able  to 
save  money  on  this  income,  and  thus  add  to  their 
principal.  The  United  States  government  bonds  were 
included  in  the  $50,000  purchase  more  as  a  matter  of 
sentiment,  for  they  could  have  invested  their  money 
to  pay  much  better,  but  the  sisters  thought,  as  a  matter 
of  patriotism,  they  would  like  to  have  a  few  of  the 
government  bonds. 


Par  valine. 

Rate. 

Cost. 

Income. 

$2,000 

Deposited  in  banks, 

34% 

$2,000 

$70 

5,000 

Mortgage, 

3% 

5,000 

250 

5,000 

City  of  Chicago,  Ill.,  bonds, 

4% 

5,100 

200 

5,000 

Local  bonds, 

4% 

5,125 

200 

5,000 

City  of  New  York, 

34% 

5,000 

175 

5,000 

A  Washington  school  district, 

44% 

5,162 

225 

5,000 

A  Colorado  school  district, 

44% 

5,137 

225 

5,000 

A  western  electric  light  and  gas  co., 

3% 

5,000 

250 

5,000 

An  interurban  railway  5%  bond, 

5% 

5,000 

250 

2,000 

United  States  government, 

3% 

2,050 

60 

5,000 

Chic.  Junct.  Rys.  &  Union  Stock  Yds., 

5% 

5,400 

250 

$49,000 

$49,974 

$2,155 

Average  income  about  4.25%. 


